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Marketing strategy and its effect on retail site : a case study of the Vancouver gasoline market Rothwell, David Colin 1970

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M A R K E T I N G S T R A T E G Y AND ITS E F F E C T ON R E T A I L S I T E : A CASE STUDY OF T H E V A N C O U V E R GASOLINE M A R K E T by DAVID B. A .  COLIN  ROTHWELL  University of Winnipeg,  1969  A THESIS S U B M I T T E D IN P A R T I A L F U L F I L M E N T O F T H E R E Q U I R E M E N T S FOR T H E D E G R E E O F MASTER OF ARTS in the Department of  Geography  We accept this thesis as conforming to the required standard  D r . Walter G . Hardwick  D r . R. James Claus T H E UNIVERSITY OF BRITISH C O L U M B I A September,  1970  In p r e s e n t i n g t h i s  thesis  an advanced degree at the L i b r a r y I  in p a r t i a l  the U n i v e r s i t y  s h a l l make i t  freely  f u l f i l m e n t o f the of B r i t i s h  available  for  requirements f o r  Columbia, I agree  that  reference and study.  f u r t h e r agree t h a t p e r m i s s i o n f o r e x t e n s i v e copying o f t h i s  thesis  f o r s c h o l a r l y purposes may be granted by the Head o f my Department or by h i s of  this  representatives.  It  thesis for financial  i s understood that copying o r p u b l i c a t i o n gain s h a l l  written permission.  Depa rtment The U n i v e r s i t y o f B r i t i s h Columbia Vancouver 8, Canada  not be allowed without my  ABSTRACT  The  t h e s i s e x a m i n e s one a s p e c t of u r b a n s t r u c t u r e  the q u a l i t y of r e t a i l s i t e . different marketing  The  -- n a m e l y  s p e c i f i c r e s e a r c h h y p o t h e s i s i s that  strategies can cause differences i n site quality.  The  g a s o l i n e s e r v i c e s t a t i o n i n d u s t r y of V a n c o u v e r ^ B r i t i s h  was  c h o s e n as a c a s e s t u d y f o r p u r p o s e s of t e s t i n g the h y p o t h e s i s .  F r o m the m a r k e t i n g  l i t e r a t u r e i t was  distinct strategies for marketing  s h o w n that t h e r e e x i s t s  gasoline:  non-price  A  two  competition  p r a c t i c e d by the m a j o r o i l c o m p a n i e s a n d p r i c e c o m p e t i t i o n p r a c t i c e d b y the s m a l l i n d e p e n d e n t s .  Columbia  as  as  quality rating schedule,  using  b o t h v a r i a b l e s i n t e r n a l to the s i t e i t s e l f ( m i c r o v a r i a b l e s ) a n d  variables  b a s e d on the s u r r o u n d i n g s o c i o - e c o n o m i c  variables  was  environment (macro  d e v i s e d as a s u r r o g a t e m e a s u r e of s i t e q u a l i t y .  p e r f o r m a n c e of a s t a t i o n was  Gallonage  u s e d as a d i r e c t m e a s u r e of s i t e q u a l i t y .  F o r a s a m p l e of m a j o r c o m p a n y s t a t i o n s the c o r r e l a t i o n s b e t w e e n s i t e rating s c o r e s and gallonage were v e r y high. schedule also possessed  The  quality rating  high predictive ability for gallonage.  It  was  d e m o n s t r a t e d that s t a t i o n s of h i g h q u a l i t y (in t e r m s o f the s i t e r a t i n g s c o r e ) p u m p the m o s t g a s o l i n e .  In c o n t r a s t ,  c o r r e l a t i o n s between the  s i t e r a t i n g s c o r e s a n d g a l l o n a g e f o r the p o p u l a t i o n o f p r i c e - c u t t e r s v e r y low. gasoline  was  S i n c e the a v e r a g e i n d e p e n d e n t s t a t i o n p u m p s t w i c e a s m u c h a s the a v e r a g e m a j o r s t a t i o n , i t w a s a p p a r e n t that the s i t e  r a t i n g i n s t r u m e n t w a s n o t a g o o d s u r r o g a t e m e a s u r e o f q u a l i t y f o r the price-cutter stations.  It i s c o n c l u d e d that e x p l a n a t i o n f o r t h i s  d i s c r e p a n c y i n g a l l o n a g e and site s c o r e s i s a t t r i b u t a b l e to the differences  i n marketing strategy.  Quality requirements for  successful  company s e r v i c e stations a r e different f r o m t h e quality r e q u i r e m e n t s of s u c c e s s f u l p r i c e - c u t t e r s t a t i o n s . industrial and urban planners.  This  fact i s i m p o r t a n t to both  F o r e x a m p l e , i n V a n c o u v e r the C i t y  C o u n c i l e m b a r k e d o n a n e x p l i c i t p l a n o f r e d u c i n g the n u m b e r o f s e r v i c e stations.  However^ its actions  w e r e made without a f u l l u n d e r s t a n d i n g  of the d i f f e r e n t c o r p o r a t e s t r a t e g i e s a n d h a v e p r e v e n t e d w h a t w a s a n a l r e a d y d e c l i n i n g p o p u l a t i o n of s t a t i o n s .  iii  T A B L E OF CONTENTS Chapter 1  2  3  Page R E T A I L SITE Q U A L I T Y : A N INTRODUCTION  1  Research Hypothesis Method of Approach Outline  2 3 4  SITE AND CITY S T R U C T U R E  5  Quality Type Network Quality Rating of Service Station Sites  9 13 19 21  T H E FIRM AND F I R M S T R A T E G Y  28  Nature of the Modern F i r m Behavioral Variables in Decision-Making Character Structure Strategy Marketing Strategy Strategy of innovation Strategy of efficiency Strategy of price Strategy of competitive difference Strategy of market segmentation Summary Nature of Marketing Strategy for O i l Companies Non-price strategy Price strategy Summary . Conclusion  28 34 35 36 37 44 46 47 51 53 54 56 57 62 65 68 68  Chapter 4  5  Page M E T H O D O F ANALYSIS AND R E S U L T S  69  Nature of the Vancouver Gasoline Market Summary Outline of Analysis Sampling Procedures Marketing Strategies Development and Application of Site Rating Instrument Data Collection Statistical Procedures Description of Data Internal Consistency of Site Rating Schedule Item Validity Three Stage Correlational Analysis Stage 1: major company stations Stage 2: independent stations Stage 3: all stations Least Square Analysis Parametric Correlation Analysis A Small Case Study  69 78 79 80 84 89 92 94 98 108 109 111 111 115 119 119 123 127  CONCLUSIONS AND IMPLICATIONS  131  BIBLIOGRAPHY  138  A P P E N D I X A - Original Data Tables  147  v  LIST  OF  TABLES  Table  Page  1  Gasoline retail firms in Vancouver market  76  2  Non-price  76  3  P r i c e c o m p e t i t o r s (1970)  4  M e a n ^ m e d i a n , a n d r a n g e of g a l l o n a g e s f o r  c o m p e t i t o r s (1970)  77  m a j o r a n d i n d e p e n d e n t s t a t i o n s i n the V a n c o u v e r study, ( g a l . / y r . ) 5  C o m p a r i s o n of B r i c k ' s  schedule and  83  reweighted  schedule  92  S p e a r m a n rank c o r r e l a t i o n s between independently rated m i c r o ,  m a c r o , and total s c o r e s f o r a l l  stations  94  V a l u e s of Z associated probability, and r e j e c t i o n of H Q f o r r a n k s u m t e s t a p p l i e d to m i c r o , m a c r o , total, and gallonage data }  107  S p e a r m a n c o r r e l a t i o n s of the e l e v e n s i t e r a t i n g v a r i a b l e s w i t h the t h r e e s i t e r a t i n g s c o r e s f o r all stations.  9  ( N = 43)  -  110  S p e a r m a n c o r r e l a t i o n s of the e l e v e n s i t e r a t i n g v a r i a b l e s w i t h the t h r e e s i t e r a t i n g s c o r e s f o r major stations.  10  ( N = 23)  112  S p e a r m a n c o r r e l a t i o n s of the e l e v e n s i t e r a t i n g v a r i a b l e s w i t h the t h r e e s i t e r a t i n g s c o r e s f o r independent  stations.  ( N = 20)  113  Table  11  S p e a r m a n and  correlations  total  site  rating  for  m i c r o ,  scores  m a c r o ,  against  gallonage  12  Standard  114  e r r o r  of  estimate  f r o m  least  squares  analysis  13  P e a r s o n  122  correlations  variables major  14  with  the  with  the  price-cutters.  P e a r s o n  16  stations.  P e a r s o n and  17  the (N  site  site  rating  of  the  scores  for  '  eleven  site  rating  site  rating  124  rating  scores  for  = 20)  of  three  125  the  eleven  site  site  rating  rating  scores  for  = 43)  correlations  126  between  site  rating  scores  gallonage  Gallonage in  with  eleven  = 23)  three  (N  correlations  variables all  (N  correlations  variables  15  three  companies.  P e a r s o n  of the  the  and  case  127  site  study.  rating  data  for  three  stations 129  LIST OF  FIGURES  Figure 1  Page The  s t r u c t u r e of i n t r a - u r b a n b u s i n e s s a n d  commerce  15  2  I l l u s t r a t i o n of B r i c k ' s s i t e r a t i n g s c h e d u l e  23  3  I l l u s t r a t i o n of C l a u s ' s i t e r a t i n g s c h e d u l e  25  4  I l l u s t r a t i o n of K e l l e y ' s s i t e r a t i n g s c h e d u l e  26  5  1967  c o n s u m e r s u r v e y a s k i n g the q u e s t i o n ,  "What b r a n d o f g a s o l i n e do y o u u s u a l l y b u y ? "  72  6  T h r e e s t a g e m o d e l of c o r r e l a t i o n a l a n a l y s i s  81  7  Independent and m a j o r c o m p a n y s e r v i c e station expenses P e r f o r m a n c e r a t i n g guide: s e r v i c e station and s e r v i c e station site  88 91  H i s t o g r a m of y e a r l y g a l l o n a g e s f o r a l l s t a t i o n s  99  8  9 10  Site r a t i n g s c o r e s f o r m a j o r  and  independent  stations  101'  11  Hypothetical least squares lines  12  S c a t t e r plot of both m a j o r  117  and independent stations  with their respective least squares lines based on m i c r o s c o r e s 13  118  S c a t t e r plot and l e a s t s q u a r e s lines f o r both major  and independent stations based  on  total s c o r e s 14  1  121  R e l a t i v e s t r e e t l o c a t i o n of t h r e e s t a t i o n s i n s m a l l case study  128  ACKNOWLEDGEMENTS  T w o u l d l i k e to t h a n k the m a n y i n d i v i d u a l s i n the i n d u s t r y who to M r .  h e l p e d me  throughout this study.  Cliff L. Goddard, Mr.  and M r .  Ray  My  D r a k e B.  I am  especially grateful  McRae, Mr.  J . C.  Mclntyre,  Pochmara.  s i n c e r e a p p r e c i a t i o n g o e s to D r .  his continued interest in my  work.  W a l t e r G.  Hardwick for  Dr. Hardwick's timely suggestions  and g o o d a d v i c e have a d d e d c o n s i d e r a b l y to m y  A  petroleum  s p e c i a l t h a n k s m u s t be g i v e n to D r .  help this t h e s i s w o u l d not have been c o m p l e t e d .  thesis.  R.  J . C l a u s without  Dr.  C l a u s was  who'  not o n l y  a c o n s t a n t s o u r c e o f i n f o r m a t i o n a n d d i r e c t i o n but he a l s o c o n t i n u a l l y g a v e of h i s t i m e a n d r e s o u r c e s to h e l p i n the d e v e l o p m e n t o f the p r e s e n t study.  "r M o r t g a g e  ' •  T h i s  and  s t u d y  has  H o u s i n g  been  .  f i n a n c e d  C o r p o r a t i o n .  i n  p a r t  by  C e n t r a l  CHAPTER  RETAIL, SITE QUALITY:  1  AN  INTRODUCTION  T h e u r b a n e n v i r o n m e n t i s a n i n t e r e s t i n g a n d c o m p e l l i n g f i e l d of study.  T o d a t e , m u c h of the r e s e a r c h done by u r b a n g e o g r a p h e r s h a s  been  l a r g e l y t h e o r e t i c a l ; d e v o i d of r e a l w o r l d c o n d i t i o n s u p o n w h i c h to b a s e private and public d e c i s i o n s .  In t h i s t h e s i s i t i s a r g u e d that a m o r e  c o m p l e t e u n d e r s t a n d i n g of u r b a n s t r u c t u r e c a n be a c h i e v e d i f a n u n d e r s t a n d i n g a n d a n a p p r e c i a t i o n of the i n d i v i d u a l s i t e s that m a k e u p the u r b a n mosaic  is f i r s t attained.  It w o u l d a p p e a r m o r e p r o f i t a b l e t o s t a r t at the  lowest common denominator, of land use.  A  s i t e , t h a n to b e g i n w i t h a n a g g r e g a t e d p a t t e r n  " s i t e " i s h e r e d e f i n e d as a f u n c t i o n a l u n i t of u r b a n s p a c e .  T h e a i m of t h i s t h e s i s i s to e x a m i n e one s p e c i f i c a s p e c t o f u r b a n structure  -- n a m e l y the q u a l i t y of r e t a i l s i t e .  The  s t u d y of s i t e i s a b r o a d a n d c o m p l e x  has dealt with site u n d e r three c a t e g o r i e s : The  topic.  The  quality, type^ and  literature network.  q u a l i t y a s p e c t s of s i t e a r e m o s t e v i d e n t i n the r e t a i l i n g s e g m e n t of  the u r b a n e n v i r o n m e n t , f o r i t i s q u a l i t y w h i c h d e t e r m i n e s the u l t i m a t e performance  of a n y r e t a i l e s t a b l i s h m e n t .  not c o m m a n d h i g h s a l e s v o l u m e s  R e t a i l s i t e s of p o o r q u a l i t y do  n o r a r e t h e y l i k e l y to m a i n t a i n t h e m s e l v e s  2 i n the m a r k e t p l a c e f o r a long p e r i o d of t i m e .  A l t h o u g h type and n e t w o r k  of s i t e a r e as i m p o r t a n t as q u a l i t y i n f o r m i n g the u r b a n l a n d s c a p e , they w i l l not be dealt w i t h at length i n this t h e s i s .  The a p p r o a c h taken h e r e i s i n c o n t r a s t to m o s t w o r k done i n u r b a n e c o n o m i c geography. A great m a n y g e o g r a p h e r s have looked at b r o a d u r b a n p a t t e r n s d e r i v e d f r o m h i g h l y aggregated s o c i a l and e c o n o m i c data to gain some u n d e r s t a n d i n g of the c i t y ; f o r e x a m p l e B u r g e s s (1925).  Others^  l i k e B e r r y (1963) who study r e t a i l l o c a t i o n , i n d u s t r i a l l o c a t i o n ^ o r s p a t i a l t h e o r y have u s e d the p a t t e r n s c r e a t e d by v a r i o u s f o r m s of land use as t h e i r b a s i c data.  A s t i l l s m a l l e r group, f o r e x a m p l e A p p l e b a u m and C o h e n (1961),  have c o n c e n t r a t e d t h e i r e f f o r t s on i n d i v i d u a l r e t a i l s i t e s and use as t h e i r b a s i c data the a t t r i b u t e s of the site i t s e l f as w e l l as other p e r t i n e n t s o c i o e c o n o m i c i n f o r m a t i o n . The p r e s e n t thesis a p p r o x i m a t e s  the l a s t a p p r o a c h  m o r e c l o s e l y than the f o r m e r t w o but deals i n g r e a t e r depth w i t h the a c t u a l ;  site a t t r i b u t e s .  Research  Hypothesis F o r the m o s t p a r t , the q u a l i t y of r e t a i l site i s d e t e r m i n e d by the  e n t r e p r e n e u r who s e l e c t s ^ builds ^ o r c r e a t e s the s i t e f o r a p a r t i c u l a r function.  C l a u s (1969) i n a study on the d y n a m i c s of g a s o l i n e s e r v i c e  stations i n C a l i f o r n i a ^ d e m o n s t r a t e d that the m o s t capable a r e able to s e l e c t the highest q u a l i t y of r e t a i l s i t e s .  entrepreneurs  In C l a u s ' study,  d i f f e r e n c e s i n m a r k e t i n g s t r a t e g y d i d not enter as an i n t e r v e n i n g v a r i a b l e i n the r e s e a r c h d e s i g n , and w e r e t h e r e f o r e not c o n s i d e r e d i n the a n a l y s i s of site q u a l i t y .  T h i s was a c c o m p l i s h e d by having a s a m p l e of stations  3 which utilized a single marketing  In a n e n d e a v o r  strategy.  to f u r t h e r the u n d e r s t a n d i n g of r e t a i l s i t e q u a l i t y  t h i s t h e s i s p r o p o s e s the r e s e a r c h h y p o t h e s i s that d i f f e r e n t m a r k e t i n g strategies can cause differences i n site quality.  M e t h o d of A p p r o a c h The  g a s o l i n e s e r v i c e s t a t i o n i n d u s t r y of V a n c o u v e r  as a c a s e s t u d y f o r p u r p o s e s  has been  of t e s t i n g the r e s e a r c h h y p o t h e s i s .  chosen  Vancouver  r e p r e s e n t s a n a r e a of 44 s q u a r e m i l e s a n d a p o p u l a t i o n of 410,000. Its l a n d a r e a i s a l m o s t f u l l y d e v e l o p e d a n d , a s s u c h , the c i t y e x h i b i t s a f a i r l y stable urban environment.  Vancouver  h i s t o r y of o i l i n d u s t r y p a r t i c i p a t i o n ;  has e x p e r i e n c e d a l o n g and i n f a c t , i t was  h e r e i n 1907  S t r e e t that the f i r s t g a s o l i n e s e r v i c e s t a t i o n i n the w o r l d was (Imperial Oil,  From  1967,  p.  I).  on S m y t h e  erected  1  the m a r k e t i n g l i t e r a t u r e i t h a s b e e n d e m o n s t r a t e d  North American  varied  that the  o i l i n d u s t r y h a s d e v e l o p e d two d i s t i n c t s t r a t e g i e s f o r  marketing gasoline.  These  a r e n o n - p r i c e c o m p e t i t i o n a s p r a c t i c e d b y the  m a j o r o i l c o m p a n i e s a n d p r i c e c o m p e t i t i o n as e m p l o y e d by s m a l l i n d e p e n dents.  The  retail site.  d i f f e r e n t m a r k e t i n g s t r a t e g i e s d e m a n d d i f f e r e n t q u a l i t i e s of F o r example, because  independent d e a l e r s use p r i c e i n s t e a d of  c o n v e n i e n c e a n d s e r v i c e as a m e a n s of a t t r a c t i n g a c e r t a i n s e g m e n t of the m a r k e t , t h e y do not n e e d to p r o v i d e the f a c i l i t i e s a n d l o c a t i o n that the  i n 1907  ^ T h e f i r s t g a s o l i n e s t a t i o n i n the U n i t e d S t a t e s was i n S t . L o u i s ( C a s s a d y & J o n e s , 1951 ^ p. 87).  also erected  major  companies  r e g a r d e d  as  surrogate  T o  population  quality  test  of  is  and  a  as  strong  gallonage.  capable  of  good  price-cutters  v e r y  low.  price-cutter  hypothesis  was  station  best  were  major  and  the  the  of  fact  conclusion  between  site  reached  was  different  that  W h e n  the  is  f r o m  the  stations  obtained  f r o m  p e r f o r m a n c e  major  the  the  and  experiment.  quality.  rating  that  the  scores  Gallonage  prediction.  location  company  for  correlation between  established  are  of  selected  m e a s u r e  and  quality.  sample  devised  direct  gallonage  stations  a  of facilities  site  gallonage.  positive  This  of  outlets  correlations  T h e  c o m p a n y  the  goodness  m e a s u r e s  schedule  against  r e g a r d e d  revealed  the  The  independent  rating  correlated  offer.  T h e  were  station  results  company  quality  A  it  of a  rating  rating  were  applied  scores  and  gallonage  quality  quality  scores  schedule  tests  the  the  to  the  were,  requirements  requirements  is  for  for  major  stations.  Outline  A  presented  of  review  in Chapter  corporate  experiment  Chapter  of the  4.  conclusions  strategy  and  about  the  literature  Chapter  3 discusses  2.  as  results  Chapter  pertinent  well  of  as  the  5. s u m s  some  of t h e i r  V a n c o u v e r  up  the  oil industry  case  and  on  case  study  the  City  site  at  and  length  city  the  structure  various  implications.  study  and  of  are  draws  T h e  presented  some  V a n c o u v e r .  is  aspects  actual  in  interesting  C H A P T E R  S I T E  It  seems  structure  of the  operating  units  components  as  or  past  that  u r b a n environment,  that  make  smallest  up  the  S T R U C T U R E  in o r d e r  one  must  structure.  functional units  a p p r o a c h to  although  to  fully understand  first  understand  In this  of  the  principles  geographic  literature  c o m m o n  r e s e a r c h  a m o n g  have  characteristics  space  is  at  of  known  concept  geography  for  to  of  time  aggregate  of  s m a l l e r  individual sites  well  one  to  f o r m s  has  on w h i c h it is  on u r b a n structure  The  urban  tended  generalized  analysis  site  u r b a n analysis  the  geographers  of  reasonable  C I T Y  thesis  in a  the  the  city  the  smallest  are  designated  sites.  This  in  only  A N D  2  has  not  based  or  their  been  have  another.  data  to  of land u s e .  discover  F o r  The  energy  even  though  themselves,  the  than  the  m o s t  study  spatial  has  in  been  t e r m  the  mentioned  popular  some  Little  used  all been  rather  spatial units.  been  widely  part^  the  method  organization  spent  and  on  s e v e r a l  has  been  decades.  a  central element  The  genesis  of this  in A m e r i c a n  concept  the  concept  geographers.  'site"  of  in  the f i e l d of geography can be t r a c e d back to the F r e n c h g e o g r a p h e r , B l a n c h a r d (1922) who d i s t i n g u i s h e d between the g e n e r a l e l e m e n t s of s i t u a t i o n and the s p e c i f i c c h a r a c t e r i s t i c s of s i t e .  To him,  site f a c t o r s  w e r e " p u r e l y l o c a l t r a i t s of the l a n d s c a p e " ( B e r r y & H o r t o n , 1970, p. 15). A n o t h e r F r e n c h g e o g r a p h e r , M a x S o r r e (1952), expanded upon B l a n c h a r d ' s b a s i c ideas  but was m a i n l y c o n c e r n e d w i t h the i n f l u e n c e of s i t u a t i o n i n  the u r b a n context.  S i t e , he b e l i e v e d , r e f e r r e d only to the n a t u r a l  morphological landscape. c i t y a r e a as a whole.  H i s s c a l e of d i s c u s s i o n on site r e l a t e d to the  F o l l o w i n g c l o s e l y on this t h e m e , D i c k i n s o n (1959)  stated that, ". . . site e m b r a c e s the p r e c i s e f e a t u r e s of the t e r r a i n on w h i c h the settlement began and o v e r w h i c h i t s p r e a d " (p. 12).  I m p l i c i t i n the e a r l y w r i t i n g s on s i t e i s the i d e a that " s i t u a t i o n " somehow i n v o l v e s the human e l e m e n t while " s i t e " i s r e l e g a t e d to a p u r e l y p h y s i c a l context.  A l s o contained i n these w o r k s i s the bias of t r e a t i n g  s i t e only on a c i t y o r s e t t l e m e n t wide s c a l e . B r o e k (1965), h o w e v e r , says that both s i t e and s i t u a t i o n a r e v e r y b r o a d concepts and c a n be a p p l i c a b l e at m a n y s c a l e s of a c t i v i t y .  H i s d e f i n i t i o n of site i s s o m e w h a t l e s s  r e s t r i c t i v e than p r e v i o u s ones: "Site . . . means the l o c a t i o n of a given place with i t s l o c a l i n t e r n a l features o r r e s o u r c e s " (p. 30).  The  t e r m " s i t e " is commonly used i n contemporary geographic  l i t e r a t u r e when r e f e r r i n g to land a r e a s of m u c h s m a l l e r s i z e than a c i t y . T h i s i s e s p e c i a l l y true i n studies dealing w i t h u r b a n l a n d e c o n o m i c s and r e t a i l l o c a t i o n (see B e r r y , 1963; A l o n s o ,  1964; M u r p h y , 1966; Huff, 1966;  G a r n e r , 1967; B e r r y & H o r t o n , 1970). H e r e the s c a l e of " s i t e " is u s u a l l y  7 r e d u c e d to the s i z e o f a b u i l d i n g l o t o r t o the b u i l d i n g i t s e l f . G a r n e r (1967) i s q u i t e e m p h a t i c that s i t e n o t o n l y c o n t a i n s  In f a c t ,  such factors  as s h a p e , s i z e , t o p o g r a p h y a n d g e o l o g y , s e w e r s , l i g h t i n g , e t c . , but a l s o i n c l u d e s the " c a p i t a l c o m m i t t e d i n the f o r m o f b u i l d i n g s " ( p p . In d i s c u s s i o n s  100-101).  on the p r o b l e m s o f s e l e c t i n g the p r o p e r r e t a i l s i t e ,  most  g e o g r a p h e r s t r e a t the b u i l d i n g a s i n t r i n s i c to the s i t e i t s e l f ( s e e P r o u d f o o t , 1938; C a n o y e r , 1968).  1946; K e l l e y , 1955; N e l s o n , 1 9 5 8 ; A p p l e b a u m ,  In other w o r d s , site has c o m e to r e p r e s e n t  not only a p l o t of l a n d  of s p e c i f i c s i z e but a l s o the b u i l d i n g s o r s t r u c t u r e s e r e c t e d u p o n that l a n d .  T h i s r e i n t e r p r e t a t i o n of the c o n c e p t of s i t e v a r i e s o n l y f r o m that o r i g i n a l l y p r o p o s e d b y B l a n c h a r d (1922).  slightly  Although site has  b e e n e x t e n d e d t o c o v e r n o t o n l y the n a t u r a l m o r p h o l o g i c a l l a n d s c a p e b u t a l s o the h u m a n l y c o n s t r u c t e d  l a n d s c a p e , the t e r m s t i l l r e t a i n s i t s o r i g i n a l  m e a n i n g o f r e f e r r i n g to s p e c i f i c a l l y p h y s i c a l a t t r i b u t e s .  A l o n g with this^  the s c a l e o f the t e r m s i t e h a s a l s o b e e n r e d u c e d s o m e w h a t .  A c c e p t a n c e o f the c o m m o n u s a g e o f the t e r m s i t e d e m a n d s the r e a l i z a t i o n that " a c i t y . . . i s d i v i d e d i n t o m a n y p a r c e l s o f l a n d , e a c h o f w h i c h m a y be c a l l e d a ' s i t e . ' M o s t of t h e s e s i t e s h a v e s t r u c t u r a l improvements designed for some particular use" (Lowry,  1970, p . 499)»  S i t e c a n t h e r e f o r e be t h o u g h t o f a s the b a s i c b u i l d i n g b l o c k i n t h e urban fabric.  It i s the a r r a n g e m e n t o r s p a t i a l p a t t e r n o f t h e s e b a s i c  b u i l d i n g b l o c k s that i s c a l l e d the s t r u c t u r e of the c i t y .  S i n c e no s i t e i s  e v e r i s o l a t e d f r o m a l l o t h e r s i t e s , the t y p e o f l i n k a g e b e t w e e n s i t e s i s  8 critical.  It i s o f t e n  transportation  positioning  here  of the various  a s ,  by  r e c u r r e n t  or  the exchange  the  and  It  site  itself  is the shape  which  is  individual sites.  are  style,  (housing)  the high  rise  obvious,  the m o s t  f o r m  altering  the  high  apartment  V a n c o u v e r  p .  profoundly  N e l s o n  19).  (p.  This  of the buildings  of sites  different  having  f o r m  the  the m o s t  laces  200).  a n d lots  of the  is the single  conveyed  which  essentially  interesting  (1969)  a r r a n g e m e n t  is usually  T h e difference  goods  not only  affects  of the city"  o r of  the  m a k e  s a m e  family  i n f o r m  differences  dwelling  here  is  i n  f o r m  in nature.  exact  both  t  result  a r e aware  little  work  aspects  of the basic  has been  relationship.  set b y the city  development  is a  of persons  1956,  of the city.  building.  geographers  their  when  rise  O n e example  but radically  o r creating  Structure  the f o r m  a n d structure  understanding  characterized  o r the t h r e e - d i m e n s i o n a l manifestation  but s o m e t i m e s  Although  between  but it a l s o  a n d architecture  subtle  establishments  a n d  Linkage  1956).  communication)  i n the structure  called  up  quite  together,  i . e .  the alignment  m o v e m e n t  (also  sites,  (Rannells,  between  require  between  determine  themselves  "a relationship  of elements  the size,  and  that  "urban transportation  by  function  linkages  of i n f o r m a t i o n " (Rannells,  structure  function  sites  interaction which  that  u r b a n  external  a n d c o m m u n i c a t i o n ,  is defined  suggests  these  done  T h e processes  of the e n v i r o n m e n t  c a n i n fact  of apartments  of a conscious  city  interdependence  determine  involved i n  c a n be v e r y  f o r m .  o n the G o l d e n  policy  i n the w a y of  F o r  C r e s c e n t  to r e s t r i c t  heavy  complex.  example,  i n  density  z o n i n g to one a r e a . waterfront  T h i s c a n be c o n t r a s t e d t o the S a n F r a n c i s c o  w h e r e b u i l d i n g h e i g h t s w e r e l i m i t e d by z o n i n g  regulations.  M u n i c i p a l and f i r e c o d e s , as w e l l as m o r t g a g e a r r a n g e m e n t s , a l s o p l a y a part i n determining  city f o r m and structure.  E v e n t h o u g h e v e r y s i t e i s u n i q u e , s o m e c o m m o n a l i t y m u s t be established among sites before meaningful r e s e a r c h can p r o c e e d . Individual sites have u s u a l l y been e x a m i n e d under three  categories:  quality, type, and n e t w o r k of s i t e .  Quality O n e of the m o s t o b v i o u s a n d m o s t i m p o r t a n t f e a t u r e s a b o u t s i t e is quality.  T h i s i s e s p e c i a l l y true f o r r e t a i l sites because it is site  q u a l i t y that d e t e r m i n e s the u l t i m a t e p e r f o r m a n c e o f a n y r e t a i l e s t a b l i s h ment.  P e r f o r m a n c e h e r e i s m e a s u r e d i n t e r m s of v o l u m e s a l e s a n d  v i a b l e e c o n o m i c l i f e o f the s i t e .  I n f a c t , i t i s s i t e q u a l i t y that o f t e n  d e t e r m i n e s the l i f e a n d d e a t h o f a b u s i n e s s  enterprise.  S i t e s p e r f o r m i n g the s a m e f u n c t i o n a n d m a i n t a i n i n g  the s a m e  t h r e s h o l d , b o t h i n s i z e a n d k i n d , a r e u n l i k e l y to d o the s a m e v o l u m e o f business.  T h i s i s b e c a u s e of q u a l i t a t i v e d i f f e r e n c e s between s i t e s .  A p p l e b a u m (1968) i l l u s t r a t e s t h i s p o i n t o f v i e w b y s a y i n g that: W h e r e d i f f e r e n t f i r m s o f f e r a s i m i l a r c h o i c e of g o o d s and  }  prices,  s e r v i c e s -- a s i s t y p i c a l l y t h e c a s e w i t h s u p e r m a r k e t s --  a n d w h e r e two o r m o r e f i r m s c o m p e t e i n a p p r o x i m a t e l y s i m i l a r l o c a t i o n s f o r the s a m e s o u r c e o f t r a d e , the s t o r e s t h a t o f f e r the b e s t r e t a i l i n g f a c i l i t i e s c a n e x p e c t t o outperform their inferior competitors  (p. 4 9 ) .  10 A l t h o u g h g e o g r a p h i c l i t e r a t u r e on the topic of r e t a i l s i t e quality i s s p a r c e , m o s t w r i t e r s who  d e a l w i t h s t o r e l o c a t i o n make frequent  m e n t i o n of the i m p o r t a n c e of having s u p e r i o r f a c i l i t i e s .  N e l s o n (1958),  f o r e x a m p l e , b e l i e v e s that " l o c a t i o n i s not the only f a c t o r d e t e r m i n i n g the s u c c e s s of the o p e r a t i o n or the b u s i n e s s v o l u m e " ( p . 141).  A great m a n y  other f a c t o r s such as p h y s i c a l c o m f o r t , convenience, r e p u t a t i o n , c h a r a c t e r of s e r v i c e , a t t r a c t i v e n e s s , e t c . a r e of e q u a l i m p o r t a n c e i n the p e r f o r m a n c e of a s i t e .  M a r t i n e a u (1958a) says that " r e g a r d l e s s of a b i l i t y  to pay, a l l shoppers seek s t o r e s whose t o t a l i m a g e i s a c c e p t a b l e and a p p e a l i n g to t h e m i n d i v i d u a l l y " (p. 49). If this i s t r u e , then  shoppers  m u s t r e c o g n i z e some q u a l i t a t i v e d i f f e r e n c e between r e t a i l o u t l e t s .  Huff (1966) a m a j o r proponent of the use of g r a v i t y m o d e l s i n a p p r o x i m a t i n g o p t i m u m r e t a i l l o c a t i o n s , has pointed out that such a n o r m a t i v e a p p r o a c h i s i n s u f f i c i e n t because i t f a i l s to c o n s i d e r the q u a l i t a t i v e aspects of r e t a i l s i t e . . . . the m o d e l does not c o n s i d e r i m p o r t a n t questions p e r t a i n i n g to the site at a p o t e n t i a l l o c a t i o n . It i s obvious that there a r e a n u m b e r of i m p o r t a n t f a c t o r s r e l a t e d to the site i t s e l f that can i n f l u e n c e the v o l u m e of s a l e s that can be expected f r o m a g i v e n l o c a t i o n . V i s i b i l i t y and a c c e s s i b i l i t y , as w e l l as the nature and c o n d i t i o n of adjacent p r o p e r t y , have a b e a r i n g on the s a l e s that can be expected. T h e r e f o r e , i t i s i m p o r t a n t that s u p p l e m e n t a l techniques f o r a p p r a i s i n g the site be u s e d i n c o n j u n c t i o n w i t h the g e n e r a l s a l e s e s t i m a t e a f f o r d e d by the m o d e l . G e n e r a l l y s u c h techniques a r e of a q u a l i t a t i v e c h a r a c t e r and thus, a g a i n , h u m a n judgement p l a y s an i m p o r t a n t r o l e i n a r r i v i n g at an a d j u s t e d s a l e s e s t i m a t e (pp. 302-303).  Other r e f e r e n c e s to site q u a l i t y i n geography can be found i n M u r p h y (1966, p. 361) when he talks about the q u a l i t y r a t i n g of m a n u f a c t u r i n g  11  sites.  P r e d (1967, 1969) a l s o m a k e s use of the concept of site q u a l i t y  in h i s f o r m u l a t i o n of the " b e h a v i o r a l m a t r i x . " A c c o r d i n g to P r e d , l o c a t i o n a l a c t o r s who  p o s s e s s the m o s t i n f o r m a t i o n and have the best  a b i l i t y to act on that i n f o r m a t i o n w i l l choose the best q u a l i t y of site f o r a specific economic activity.  G a r n e r (1966) i n h i s d i s c u s s i o n on "Rent and Site U t i l i t y " points out that although r e l a t i v e l o c a t i o n of a site w i t h i n the c i t y i s a p r i m e c o n s i d e r a t i o n , ". . . m o r e i m p o r t a n t , h o w e v e r , f r o m the r e t a i l i n g point of v i e w , i s the ' p h y s i c a l q u a l i t y of the s i t e " (p. 100). 1  He says that site  p r o d u c t i v i t y i s subject to " i n t e r n a l site v a r i a t i o n s " (p. 101).  The topic  of i n t e r n a l v a r i a t i o n w i l l be e x a m i n e d at a l a t e r point.  The  ideas p r o p o s e d by G a r n e r come f r o m his r e a l i z a t i o n that  both c o n s u m e r b e h a v i o r ( E n g e l , et a l entrepreneur  1968) and the b e h a v i o r of the  ( P r e d , 1967) are m o r e c o m p l e x than the postulates of  c e n t r a l place imply.  C o n s u m e r b e h a v i o r i s of p a r t i c u l a r i m p o r t a n c e i n  r e t a i l i n g because c o n s u m e r s can be l i n k e d to p a r t i c u l a r  establishments  for the p u r c h a s e of a given good a c c o r d i n g to t h e i r p r e f e r e n c e and p o s i t i o n i n the v a r i o u s s t r a t a of the u r b a n m a r k e t ( G a r n e r ,  1966, pp.  115-116),  G a r n e r a l s o c l a i m s that: E s t a b l i s h m e n t s a r e not e x a c t l y s i m i l a r but are d i f f e r e n t i a t e d f r o m each other i n m a n y subtle ways. Q u a l i t a t i v e d i f f e r e n c e s whether r e a l o r f a n c i e d i n the eyes of the c o n s u m e r , a r i s e f r o m a c o m b i n a t i o n of (a) d i f f e r e n c e s i n the p r o d u c t s o l d , and (b) d i f f e r e n c e s i n the c o n d i t i o n s u r r o u n d i n g the s a l e (p. 116).  12  According  to G a r n e r q u a l i t a t i v e d i f f e r e n c e s i n r e t a i l s i t e  e v i d e n c e d v i a s u c h a t t r i b u t e s as the g e n e r a l tone of the s t o r e ,  are  personal  s e r v i c e , r e p u t a t i o n , p h y s i c a l f a c i l i t i e s a v a i l a b l e , p e r s o n a l a t t r a c t i o n of the s u r r o u n d i n g s ,  c o n v e n i e n c e , e t c . (p.  117).  M o s t w r i t e r s w o u l d s e e m to c o n c l u d e that the b e s t p e r f o r m a n c e i n the m a r k e t p l a c e i s a c c o m p l i s h e d by s i t e s of h i g h e s t q u a l i t y .  Site  q u a l i t y c o u l d t h e n be d e f i n e d as the a b i l i t y of a r e t a i l s i t e to p e r f o r m f u n c t i o n f o r w h i c h i t was  d e s i g n e d , m e a s u r e d i n t e r m s of f a c i l i t i e s  l a y o u t of the s i t e i t s e l f ( C l a u s  & Rothwell,  1970,  p.  the  and  86).  M o s t o b v i o u s l y , the d i f f i c u l t y w i t h e m p i r i c a l r e s e a r c h of t h i s type l i e s i n the i s o l a t i o n a n d m e a s u r e m e n t of v a r i a b l e s to g a u g e s i t e quality. for  Claus  (1969) d e m o n s t r a t e d that t h i s c o u l d be done f a i r l y a c c u r a t e l y  g a s o l i n e s e r v i c e stations and  m o r e w i l l be m e n t i o n e d a b o u t t h i s l a t e r .  O t h e r r e s e a r c h of t h i s t y p e i s p r e s e n t l y b e i n g c a r r i e d on f o r d o c t o r s ' o f f i c e s ( B o t t o m l e y , 1970)  a n d h o u s i n g ( H a y w a r d , 1970), but a g r e a t  deal  m o r e w o r k n e e d s to be done i n o r d e r that c o m p a r i s o n s b e t w e e n d i f f e r e n t t y p e s of s i t e s c a n be  accomplished.  It c a n n o t be e m p h a s i z e d too s t r o n g l y that the s u c c e s s of a p a r t i c u l a r r e t a i l e s t a b l i s h m e n t If we  or failure  i s l a r g e l y a f u n c t i o n of s i t e q u a l i t y .  a r e to u n d e r s t a n d the s t r u c t u r e of the u r b a n e n v i r o n m e n t , we  f i r s t k n o w the p r o c e s s  involved in determining  e x i s t e n c e of the c o m p o n e n t p a r t s  must  the e x i s t e n c e o r n o n -  - - i n t h i s c a s e the i n d i v i d u a l r e t a i l s i t e s .  13  Type  A  of u r b a n  where  one  sites  the  type  type  great  of  o n the  structure  would  is  by  by  done  size  of  by  of  (3)  and  of  the  business  has  their  method  be  the  literature  This  been  position  of  would  Proudfoot  (1937)  who  types  and  the  urban  types  to  be  of  the  the  true  classification  for  retail  all business  rather  site.  than  the  into  H e r e  the  determining  Although  s a m e ,  sites  sites  structure.  structure,  used  type  of  effort  the  customer,  C . B . D . ,  cluster.  mode  of  in typology  c r i t e r i a of  (2)  thoroughfare,  store  is  to  on  the  latter  approach  flexible.  geographic  isolated  especially  i n the  appear  major  (1)  exists  aggregate  various  first  "structure:"  is  to  according  most  p r i n c i p a l business  (5)  type.  arrangement  establishment,  retail  to  categorized  to  The  geographic  practice  basis  either  s e e m  of  according  general  site  results  deal  to  size  of  of  five  business  (4)  neighborhood  Implicit  in.Proudfoot's  used  in  sites  was  agglomeration,  establish  outlying  transportation  retail  categories  center,  business  street,  categorization  reaching  the  establishment.  C a n o y e r  her  (1946)  classification  s i m i l a r  centers,  to  those  (3)  of  in  retail  explicit  streets  K e l l e y  use  "locations."  Proudfoot:  string  Although  transportation  of  made  (1)  (4)  (1956)  establishing  a  of  H e r  central  mode  five  categories  shopping  neighborhoods^  employs  fairly  of t r a n s p o r t a t i o n  threshold  detailed  are  district,  (5)  size,  (2)  isolated  range,  description  of  in  v e r y  s u b -  stores.  and  business  of  14 " s t r u c t u r e " his m o d e l i s based on the idea of cost m i n i m i z a t i o n .  People  w i l l always shop at the place of l e a s t t r a n s f e r cost f o r a s p e c i f i c good. K e l l e y i s one of many w r i t e r s to i n t r o d u c e the i d e a of planned and unplanned shopping centers into the type of r e t a i l s i t e s .  N e l s o n (1958) takes a s l i g h t l y d i f f e r e n t stance and c l a i m s that there a r e two types of r e t a i l " l o c a t i o n s : " (1) g e n e r a t i v e , to w h i c h the c u s t o m e r i s d i r e c t l y a t t r a c t e d f r o m h i s place of r e s i d e n c e , and  (2)  s u s c i p i e n t , to w h i c h the c u s t o m e r i s i m p u l s i v e l y or c o i n c i d e n t l y a t t r a c t e d w h i l e m o v i n g about the a r e a w h e r e the r e t a i l s t o r e i s l o c a t e d . A t the b a s i s of Nelson's typology i s s t i l l the i d e a of s o m e f o r m of l i n k a g e between different sites.  P r o b a b l y the m o s t w e l l known w o r k on types of r e t a i l s i t e s has come f r o m the C h i c a g o s c h o o l l e d by B r i a n B e r r y (see B e r r y , B e r r y & Tennant, 1965; S i m m o n s , 1964,  1963;  1966). U s i n g the b a s i c p r o c e s s e s  of c e n t r a l p l a c e t h e o r y , B e r r y p r o p o s e s a h i e r a r c h i c a l s t r u c t u r i n g of i n t r a - u r b a n r e t a i l centers s i m i l a r to that u s e d to d e s c r i b e u r b a n s e t t l e ments and t h e i r h i n t e r l a n d . Unable to account for h i g h w a y - o r i e n t e d  or  s p e c i a l i z e d r e t a i l i n g s t r i c t l y by the use of c e n t r a l p l a c e a x i o m s , B e r r y m o d i f i e d h i s g e n e r a l m o d e l to make them f i t into the " s t r u c t u r e " ( F i g u r e 1). C e n t r a l to B e r r y ' s h i e r a r c h i c a l o r d e r i n g of r e t a i l c e n t e r s a r e the concepts of range and t h r e s h o l d .  Range i s the distance that a  c o n s u m e r w i l l t r a v e l i n o r d e r to p u r c h a s e goods at a r e t a i l outlet and t h r e s h o l d i s defined as the m i n i m u m s a l e s v o l u m e r e q u i r e d f o r the i n i t i a l o p e r a t i o n or the c o n d i t i o n of e n t r y of any r e t a i l business type.  (It should  RIBBONS  CENTERS Planned or  SPECIALIZED  AREAS  I  Unplanned  Automobiles rows  Traditiona I shopping street I  Conv.  Community  Printing  Urban arterial  Neighb'd -«  I  •—  Regional  New suburban ribbon  Metropolitan C.B.D. •*  I  -1—1 Entertainment  Highway oriented Planned (plaza) Unplanned  Exotic  I  1:  The  structure  Source:  B e r r y  of k  intra-urban H o r t o n ,  business  1970,  p.  and  457.  c o m m e r c e .  districts  markets  Furniture districts  Medical  F I G U R E  districts  centers Planned U nplanned  16 be noted that business type, defined by the S.I.C. index, and type of site a r e not s y n o n y m o u s . ) A c c o r d i n g  to the m o d e l " a l l b u s i n e s s types a r e  o r d e r e d a c c o r d i n g to t h r e s h o l d s i z e " ( G a r n e r , 1966, p. 104),  therefore  the e n t e r p r i s e with the highest t h r e s h o l d w i l l demand the m o s t a c c e s s i b l e spot i n the c i t y and w i l l  of c o u r s e , be at the top of the h i e r a r c h y .  A s G a r n e r (1966) points out, h o w e v e r , the r e a l w o r l d  patterns  a r e c o n s i d e r a b l y m o r e c o m p l e x than this d e t e r m i n i s t i c m o d e l suggests (p. 144). One a s s u m p t i o n that cannot be met by the m o d e l i s that r e t a i l outlets p e r f o r m i n g the s a m e f u n c t i o n have i d e n t i c a l t h r e s h o l d s : not only i n s i z e but a l s o i n k i n d of p r o d u c t .  identical  G a r n e r uses the e x a m p l e of  b a r s that m a y range f r o m a c h i c c o c k t a i l lounge to the p r o v e r b i a l " j o i n t . " A l t h o u g h s e r v i n g e s s e n t i a l l y the s a m e function they a r e not l i k e l y to have the same t h r e s h o l d ; n o r , i n f a c t , do they o f f e r the s a m e p r o d u c t . R a t h e r than g r o u p i n g a l l b a r s into one c l a s s of b u s i n e s s type u n d e r the a v a i l a b l e s y s t e m of c l a s s i f i c a t i o n , i t would be m o r e r e a l i s t i c to c o n s i d e r them as o f f e r i n g d i f f e r e n t goods and consequently c o m p r i s i n g d i f f e r e n t b u s i n e s s types. A s i m i l a r a r g u m e n t can be extended to include the c l a s s i f i c a t i o n of a l l other b u s i n e s s types i n the n u c l e a t i o n (p. 116). o  o  «  o  o  o  o  o  o  a  o  »  a  o  Q  *  Q  *  »  «  o  «  a  o  e  a  o  Once the a s s u m p t i o n of h o m o g e n e i t y w i t h i n any b u s i n e s s type is r e l a x e d to i n c l u d e the notion of p r o d u c t d i f f e r e n t i a t i o n , it i s apparent that a s i m p l e r a n k i n g of b u s i n e s s types by t h r e s h o l d s i z e i s no l o n g e r p o s s i b l e . . . i n s t e a d . . . e a c h b u s i n e s s type w i l l be a s s o c i a t e d w i t h a range of t h r e s h o l d s r a t h e r than j u s t a unique t h r e s h o l d s i z e as i m p l i e d i n the o p e r a t i o n a l d e f i n i t i o n s of t h r e s h o l d u s e d i n the c u r r e n t l i t e r a t u r e (p. 118).  The  i m p o r t a n c e of p r o d u c t d i f f e r e n t i a t i o n i n r e t a i l s i t e s has been  noted by m a n y s c h o l a r s .  K e l l e y (1956), f o r i n s t a n c e , points out the  d i f f e r e n c e between p r o d u c t t h r e s h o l d s f o r shopping c e n t e r s and d e p a r t m e n t  17 s t o r e s (p. 415).  T h i s p r i n c i p a l is a l s o f i r m l y e s t a b l i s h e d i n g e o g r a p h i c  l i t e r a t u r e by the m a n y e x a m p l e s of c o r n e r g r o c e r y s t o r e s w h i c h s u r v i v e on convenience goods and the l a r g e r s u p e r m a r k e t s w h i c h s e l l a m u c h w i d e r range of p r o d u c t s .  The  m o s t s u i t a b l e c l a s s i f i c a t i o n of u r b a n r e t a i l s i t e s would s e e m  to be one w h i c h dealt w i t h i n d i v i d u a l r e t a i l f u n c t i o n s .  In other w o r d s , a  typology m i g h t be made f o r h o t e l s i t e s , laundromat.sites^ o f f i c e s , etc.  The  doctors'  m o s t s a l i e n t features on w h i c h to base this typology  (as suggested by the l i t e r a t u r e ) a p p e a r to be the dominant f o r m s t r u c t u r e of t r a n s p o r t a t i o n that i s u s e d to frequent.the  and  site and the k i n d  and s i z e of t h r e s h o l d of the s i t e .  T r a n s p o r t a t i o n mode as a f a c t o r i n d e t e r m i n i n g  type of site has  been u s e d i m p l i c i t l y o r e x p l i c i t l y by P r o u d f o o t (1937), C a n o y e r (1946), K e l l e y (1956), N e l s o n (1958), H o r t o n (1968), and to some extent (1963).  Berry  R a n n e l l s (1956) says that i t i s the n u m b e r and type of l i n k a g e s  that are made between s i t e s that i n effect d e t e r m i n e c i t y s t r u c t u r e . If this is t r u e i t i s p e r h a p s w i s e to c l a s s i f y type of site by t r a n s p o r t a t i o n mode.  The  r o l e of the t h r e s h o l d i n type of s i t e i s not c l e a r although  some definite r e l a t i o n s h i p appears to e x i s t .  P e r h a p s i t i s the mode of  t r a n s p o r t a t i o n that d e t e r m i n e s t h r e s h o l d ; but as yet this has not been e m p i r i c a l l y tested.  A n e x c e l l e n t e x a m p l e of c l a s s i f i c a t i o n of site by type comes  18  f r o m  the  oil industry.  mainstreet,  shopping  on  of  the  basis  particular  of  the  to  note  is  kind  due  here  how  to  the  of  service  that  The  stations  flow.  The  would  not  transportation  are  layout,  work  a r t e r y  stations  downtown)  transportation.  fact  station  the  types  neighborhood,  and  of traffic  neighborhood  five  center,  threshold  transportation  a  T h e i r  are  distinction  designed  the  can  distinguished  obvious  facilities,  on  (freeway,  to  also  accommodate  and  freeway.  product  It  effect  by  the  is  m i x  interesting  f o r m  of  the  site.  Although  income  the  f r o m  same  its  one-half  of  repairing  true  for  other  size  receives  service  of t h r e s h o l d  the  f r o m  all types  of  site.  is  as  that  hoped  that  by  is  transportation  structure  can  be  be  and  a  done.  m o r e  "Refinements  thorough  differentiation  p.  351).  observed.  M o r e  appraisal  between  income  method  even  needed  of the  establishments  attention  must  also  but  related  m a y  be  of  derive  example,  station,  and  in kind  m a y  need  usually  products,  f r o m  while  servicing  threshold  retail  affinity  H o w e v e r ,  are  for  classifying  the  that  station,  also  is  and  generally  sites.  strong  using  and  to  station  of  they  gasoline  difference  a  threshold  of  station's  methods  gasoline  neighborhood  sale  This  there  sell  freeway  the  the  service  present  shown  The  neighborhood  automobiles.  already  stations  sources.  income  The  It  all  be  among  of typing  finer  certain  sites  types  i n the  work  to  this  be  concept  the  mode  of  and  developed"  of  in  topic  classification  threshold  must  on  has  of  according  differentiations  m o r e  paid  establishments  retail  to  retail  still  needs  business  types  product  ( G a r n e r ,  19&7,  transportation  19  that i s u s e d to gain a c c e s s to the s i t e .  Network N e t w o r k s * of r e t a i l s i t e s (although aggregated to a m u c h l a r g e r s c a l e ) has r e c e i v e d a great d e a l of attention f r o m g e o g r a p h e r s , w i t h C h r i s t a l l e r ' s (1933) w o r k on c e n t r a l p l a c e t h e o r y and being  starting pursued  a g g r e s s i v e l y by others i n c l u d i n g B e r r y (1967) and h i s c o l l e a g u e s . A l t h o u g h this a r e a has been w o r k e d i n great depth, one of the m a i n d r a w b a c k s to this a p p r o a c h i s that i t i s i n the c a t e g o r y of being  normative  geography ( W o l p e r t , 1964). A s s u c h , i t has l i t t l e p r a c t i c a l a p p l i c a t i o n when a p p l i e d to the s c a l e of i n d i v i d u a l s i t e s .  E v e n at the s c a l e of " r e t a i l  c e n t e r s " w i t h i n c i t i e s , this a p p r o a c h i s not adequate enough to d e s c r i b e the r e a l w o r l d s i t u a t i o n ( B e r r y , 1959, p. 154).  G e o g r a p h i c r e s e a r c h on network of s i t e s f o r a s i n g l e r e t a i l type has m a i n l y taken the f o r m of d e l i n e a t i o n of t r a d e a r e a s f o r v a r i o u s r e t a i l outlets o r the a p p r a i s a l of the s p a t i a l d i s p e r s i o n of c o m p e t i t i v e sites„ B o t h of these t o p i c s demand a s p a t i a l study of the e x i s t i n g s i t e s of a p a r t i c u l a r r e t a i l type.  C a n o y e r (1946) r e g a r d s c o m p e t i t i o n as the second m o s t i m p o r t a n t f a c t o r , behind t r a f f i c d e n s i t y , i n d e t e r m i n i n g the s u c c e s s f u l s e l e c t i o n of a retail site.  She states that this i s e s p e c i a l l y true i n p i c k i n g g a s o l i n e  s e r v i c e stations that w i l l have a high s a l e s v o l u m e (p. 43).  In h e r a n a l y s i s  of site s e l e c t i o n methods, m u c h t i m e i s devoted to e x a m i n i n g the l o c a t i o n  ^•Network h e r e should not be confused w i t h g r a p h t h e o r y .  20 and q u a l i t y of s i m i l a r types of r e t a i l s i t e s s u r r o u n d i n g a p r o s p e c t i v e location.  K e l l e y (1955) a l s o m a k e s s p e c i a l m e n t i o n of the  geographic  d i s p e r s i o n of c o m p e t i t i v e outlets as an i m p o r t a n t c r i t e r i a i n the s e l e c t i o n of r e t a i l s i t e s .  S i m i l a r l y , this point i s developed e x t e n s i v e l y by  K o r n b l a u and B a k e r (1968) who  state that ". . . the quantity, q u a l i t y , and  l o c a t i o n of c o m p e t i t i o n (present and p r o s p e c t i v e ) affect the p e r f o r m a n c e of e x i s t i n g s t o r e s . . . .  T h e y a r e a l s o v i t a l e l e m e n t s i n planning a s t o r e  l o c a t i o n s t r a t e g y f o r an e x t e n s i v e m a r k e t a r e a " (p. 129).  Huff (1966) i n  his m o d e l f o r p r e d i c t i n g o p t i m u m r e t a i l l o c a t i o n a l s o takes the l o c a t i o n , quantity, and q u a l i t y of c o m p e t i t i v e f i r m s into account.  A n i n t e r e s t i n g aspect of site n e t w o r k i s m e n t i o n e d by A l d e r s o n and S h a p i r o (1964), who  e x p l a i n that a f i r m may  choose to b u i l d an  " o p t i m a l n e t w o r k of s i t e s . " T h i s i s done i n o r d e r to make e f f i c i e n t use of w i d e s p r e a d a d v e r t i s i n g and c r e d i t c a r d s .  The g e n e r a l p l a n i n this move  s e e m s to be the s t r a t e g i c p l a c e m e n t of s i t e s throughout the whole m a r k e t area.  K o r n b l a u and B a k e r (1968) a r e quick to point out that this p r a c t i c e  is t y p i c a l of c e r t a i n types of c h a i n s t o r e s . A l t h o u g h s u c h a network s y s t e m has not been s t u d i e d by g e o g r a p h e r s , the r e t u r n s f r o m r e s e a r c h on this topic would s e e m to be of g r e a t help i n u n d e r s t a n d i n g the o v e r a l l u r b a n structure.  A knowledge of the p r o c e s s e s i n v o l v e d i n the f u n c t i o n i n g of a  c o m p l e x n e t w o r k of r e t a i l s i t e s would undoubtedly add a g r e a t d e a l to our u n d e r s t a n d i n g of l i n k a g e s i n the c i t y .  In a case l i k e t h i s ^ there a r e  l i n k a g e s between the i n d i v i d u a l s i t e s and the f i r m that owns t h e m ,  21 linkages  between  to  sites.  m a n y  It  to  is  establish  Quality  can  Rating  cause  quality  has  hoped  the  In  consumers  of  Service  order  must  be  to  as  r e m a i n d e r  of this  to  quality  A  to  give  with  field  m a r k e t  used  site  ment  a  site  r e a l  and  m o s t  any  rating  of  given  is  procedures  versions  significant  M u c h  of  deal  where  serve  these  following  Rothwell,  the  be  &  of  will  be  c o n s u m e r s  done  test  in  order  field  of a n  as  are  an  of  a  unit  why  of  m a r k e t  The  used  value  c o m m o n l y  used,  being  a  p e r f o r m a n c e  has  been  (1971).  in  usually  f r o m  be  of  develop-  essence  of  appraisal  to  unit under  taken  is  the  should  considered  of the  in  natural  Traditional methods  were  estate  development  was  which  designed  r e a l  used  estate  m a t e r i a l  instrument  instrument  frequently  criterion.  Bottomley  the  2  real  factors  industry  hypothesis,  criterion m e a s u r e  of  site  station  development  T h e y  the  strategies  to . m e a s u r e  the  performance  the  marketing  service  defined  methods.  the  to  however  as  the  those  topic  different  gasoline  sites.  the  of a p p r a i s a l  isolate  of the  of  within  this  linkages  instrument  with  can  reason  in affecting  C l a u s ,  the  criterion.  no  can  an  station  appraisal  that  in which  instrument  m e a s u r e  to  Since  will  and  approach.  quality,  m e a s u r e  some  into  hypothesis  service  rating  an  site,  Sites  study  chapter  T h e r e  attempted  by  case  instruments  of the  article  a  estate  value.  f o r m a l i z e d  have  to  Station  the  single  such  in site  quantitative  respect  of  test  of  a  r e s e a r c h  established.  chosen  the  some  feasibility  differences  been  rate  that  and  be  the  consideration  a  forthcoming  22 a n d to e s t i m a t e i n the l i g h t of t h e s e f a c t o r s the p e r f o r m a n c e E x c e l l e n t e x a m p l e s of s u c h m e t h o d s c a n be f o u n d i n C a r b D r e n n a n (1968).  The  o f the u n i t .  (1968) a n d  m a j o r d r a w b a c k of t h e s e m e t h o d s i s that t h e y a r e  e x t r e m e l y t i m e c o n s u m i n g due to the l a r g e a m o u n t s o f d a t a that m u s t  be  collected.  In a n a t t e m p t to s i g n i f i c a n t l y d e c r e a s e the a m o u n t of t i m e n e e d e d to p e r f o r m an a p p r a i s a l v a r i o u s w r i t e r s designed site rating s c h e d u l e s . C a n o y e r (1946, pp.  21-22) was  one of the f i r s t to do t h i s .  A  schedule  d e v e l o p e d by B r i c k (1968) c o n c e r n e d i t s e l f w i t h the a p p r a i s a l of g a s o l i n e s e r v i c e s t a t i o n s a n d i n i t he p r e s e n t e d e l e v e n f a c t o r s as b e i n g o f m a j o r importance  ( F i g u r e 2).  The  a p p r a i s e r r a t e s the s t a t i o n u n d e r c o n s i d e r a t i o n  on a f i v e p o i n t l i n e a r s c a l e w i t h r e s p e c t to the e l e v e n v a r i a b l e s . v a r i a b l e s a r e then a s s i g n e d d i f f e r e n t i a l weightings, e.g.  These  visibility  7 per  c e n t , a d e q u a c y of s i z e a n d s h a p e 10 p e r c e n t , a n d a t o t a l p e r c e n t a g e  score  i s thus o b t a i n e d f o r the s t a t i o n by s u m m i n g a c r o s s the e l e v e n v a r i a b l e s * S u c h a s c h e d u l e c a n o n l y be u s e f u l w h e n i t i s a c c o m p a n i e d w i t h a  compre-  h e n s i v e s i t e r a t i n g m a n u a l i n w h i c h the i m p o r t a n t f a c t o r s a r e d i s c u s s e d i n o r d e r to p r o v i d e c r i t e r i a f o r the a s s i g n m e n t f i v e p o s s i b l e s c o r e s on e a c h v a r i a b l e .  o f a s t a t i o n to one of the  B r i c k d o e s not s t a t e what h i s  c r i t e r i o n m e a s u r e i s , a l t h o u g h i m p l i c i t l y he s u g g e s t s that i t i s a v e r a g e m o n t h l y g a l l o n a g e p u m p e d b y the s t a t i o n .  T h i s s c h e d u l e has been i n  c o m m o n u s e a m o n g s i t e d e v e l o p e r s f o r s o m e t i m e a n d f o r m e d the b a s i s of the i n s t r u m e n t u s e d i n the C a l i f o r n i a g a s o l i n e s t u d y ( C l a u s , 1969).  C l a u s m a d e two m o d i f i c a t i o n s to B r i c k ' s o r i g i n a l  instrument.'  F a c t o r  Weighted  Excellent (100)  %  10  Adequacy  of  10  Neighborhood  9  Grade  7  Visibility  11  of  Transient  4  Zoning  5  E a s e  7  E c o n o m i c  100  Stability  Future  Total  of  highway  roadway  of traffic  business  balance of  flow  potential  2:  score  G o o d (60)  Below (40)  A v e .  P o o r (20)  10  8  6  4  2  10  8  6  4  2  9  7.2  5.4  3.6  1.8  7  5.6  4.2  2.8  1.4  8. 8  6.  4.4  2.2  6  4.8  3.6  2.4  1.2  4  3.2  2.4  1.6  5  4  3  2  1  7.2  3.6  2.6  6  .8  (including  buildings)  of  A v e .  (80)  11  area  trends  point  F I G U R E  potential  approach  adequacy  13  and  f r o m  Compatability  of  business  street  6  18  size  Above  area  --  50.8  Illustration (Source:  of  rating  B r i c k ' s  B r i c k ,  1968)  18  14.  13  10.4  7.8  5.2  7  5.6  4.2  2.  - below  Site  4  average  Rating  Schedule  10.  8  8  1.4  24 The f i r s t was to exclude the zoning and ease of a c c e s s f a c t o r s and substitute i n t h e i r place the m o n o p o l i s t i c and s t r a t e g i c f a c t o r s .  This  m o d i f i c a t i o n had been made i n i t i a l l y by m a n y of the site d e v e l o p e r s u s i n g the schedule i n C a l i f o r n i a .  The s e c o n d m o d i f i c a t i o n was m o r e b a s i c i n  nature and was to divide the e l e v e n f a c t o r s into two g r o u p s , one group t e r m e d the m i c r o - l a y o u t subgroup and the o t h e r , the m a c r o - l o c a t i o n subgroup ( F i g u r e 3). T h i s s p l i t r e c o g n i z e s that those f a c t o r s that a r e i n t r i n s i c to the site a r e of a d i f f e r e n t nature than the f a c t o r s i n the m a c r o subgroup.  That both sets of f a c t o r s i n f l u e n c e the p e r f o r m a n c e of a r e t a i l  site was r e c o g n i z e d by K e l l e y (1955, p. 429, see F i g u r e 4) and by Huff (1966), who s a y s , "It is obvious that there a r e a n u m b e r of i m p o r t a n t f a c t o r s r e l a t e d to the site i t s e l f that can i n f l u e n c e the v o l u m e of s a l e s that can be expected f r o m a g i v e n l o c a t i o n .  V i s i b i l i t y and a c c e s s i b i l i t y , as  w e l l as the nature and c o n d i t i o n of adjacent p r o p e r t y , have a b e a r i n g on the s a l e s that c a n be e x p e c t e d " (p. 302).  T h i s point i s w e l l taken, but i t  is a s s e r t e d h e r e that the two subgroups of f a c t o r s a r e s u r r o g a t e s f o r two d i f f e r e n t types of p e r f o r m a n c e .  The m i c r o subgroups a r e seen as  s u r r o g a t e s of gallonage w h e r e a s the m a c r o f a c t o r s a r e seen as s u r r o g a t e s of l o n g e v i t y , i . e . the p r o p e n s i t y of a g a s o l i n e s e r v i c e s t a t i o n to r e m a i n in b u s i n e s s .  T h e s e concepts have been d i s c u s s e d by C l a u s and R o t h w e l l  (1970) as f o l l o w s : The a b b r e v i a t i o n s INSV and E X S V r e p r e s e n t the t e r m s i n t e r n a l site v a r i a b l e and e x t e r n a l site v a r i a b l e r e s p e c t i v e l y . In an e a r l i e r book of this s e r i e s , S p a t i a l D y n a m i c s of G a s o l i n e S e r v i c e S t a t i o n s , the p h r a s e " m i c r o " was u s e d to convey the concept of INSV and " m a c r o " t o s i g n i f y the concept of E X S V . Both " m i c r o " and INSV r e p r e s e n t the i d e a that c e r t a i n v a r i a b l e s i n t e r n a l to, o r i n t r i n s i c i n , the site i t s e l f i n f l u e n c e  Rating Variables  MICRO  100% Excellent  60%  80% Above A v e .  LAYOUT  Good  40% Below A v e .  20% Poor  «  A d e q u a c y of s i z e a n d s h a p e  10  8  6  4  2  Visibility  7  5.6  4.2  2. 8  1.4  Street and highway grades  9 .  7.2  5.4  3.6  1.8  8. 8  6.6  4.4  2.2  7.2  3.6  C o m p a t a b i l i t y to t r a f f i c E c o n o m i c balance  11  (including 18  14.4  10.8  10  8  6  4  2  6  4.8  3.6  2.4  1.2  4  3.2  2.4  1.6  .8  13  10.4  7.8  •5.2  2.6  F u t u r e trends of a r e a  7  5.6  4.2  2.8  1.4  Strategic  5  4  3  2  1  a d e q u a c y of b u i l d i n g s ) MACRO  LAYOUT  Neighborhood business T r a n s i e n t business  potential  potential  Monopolistic factor Stability of a r e a i  factor  F I G U R E 3: I l l u s t r a t i o n of C l a u s ' S i t e R a t i n g S c h e d u l e (Source:  Claus  5  1969)  26 Factors  R a n k i n g of Site 2  A.  REGIONAL  3  4  FACTORS  Population w i t h i n 15 m i n u t e s 16-30 m i n u t e s Purchasing  power  amount and stability distribution G r o w t h of p o p u l a t i o n amount degree Competition amount quality B.  SITE  FACTORS  Size of t r a c t minimum  size  undivided buffer  area  A c c e s s and egress primary  roads  secondary roads Traffic present pattern future pattern Parking amount n e a r n e s s to s t o r e s Cost acquisition maintenance C.  SITE  FACTORS  T e r r a i n conditions grading subsoil conditions Utilities proximity Expans ion -Environment expansion environment  F I G U R E 4: I l l u s t r a t i o n o f K e l l e y ' s Site R a t i n g (Source:  K e l l e y , 1955)  Schedule  27 the p e r f o r m a n c e  of the s i t e .  Similarly,  " m a c r o " and  EXSV  c o n v e y the thought that v a r i a b l e s a s s o c i a t e d w i t h the e n v i r o n s , i.e. surrounding socio-economic  climate, determine  e c o n o m i c v i a b i l i t y of a s p e c i f i c s i t e .  the  INSV is concerned  with  the s i t e i t s e l f , w h i l e E X S V i s c o n c e r n e d w i t h the s u r r o u n d i n g area.  T h e s e two  concepts may  be l i k e n e d to the p h r a s e  "site  a n d s i t u a t i o n " w h i c h has g a i n e d p o p u l a r i t y i n s e v e r a l s c h o o l s of g e o g r a p h y , but f o r o u r p u r p o s e s  c o n t a i n s c o n n o t a t i o n s that  a r e n o t a l t o g e t h e r c o m p a t i b l e w i t h o u r p r e s e n t r e s e a r c h (p. 27).  The  a c t u a l a p p l i c a t i o n a n d u s e of the s i t e r a t i n g i n s t r u m e n t i n the  V a n c o u v e r m a r k e t w i l l be d i s c u s s e d l a t e r u n d e r the m e t h o d s o f a n a l y s i s . It h a s b e e n i n t r o d u c e d at t h i s p o i n t as s u p p o r t i n g e v i d e n c e on the of s i t e q u a l i t y i n e x a m i n i n g  urban  structure.  importance  CHAPTER  THE  N a t u r e of the M o d e r n The concerning  F I R M AND  the l a n d s c a p e a r e v e r y c o m p l i c a t e d . man,  firm.  S i m o n , 1964b).  f i r m s ) may  The  decision-maker  can  a home owner, a city council, a p r o f e s s i o n a l  t h e r e e x i s t s both i n d i v i d u a l a n d 1963;  STRATEGY  Firm  organization, or a business  (business  FIRM  elements responsible for making positive decisions  be a s m a l l b u s i n e s s  March,  3  E v e n within organizations  themselves,  collective decision-makers (Cyert As  Form  (1954) p o i n t s out,  &  "While they  not c o n s u m e the g r e a t e s t q u a n t i t i e s of l a n d ^ t h e y  do  p u r c h a s e the l a r g e s t m o s t s t r a t e g i c p a r c e l s . U n k n o w i n g l y t h e i r l o c a t i o n a l d e c i s i o n s t e n d to s e t the p a t t e r n of l a n d u s e f o r o t h e r e c o n o m i c a n d economic organizations  1 1  (p. 318).  B l a u and  non-  S c o t t (1962) a l s o e m p h a s i z e  the i m p o r t a n c e of f i r m ' s d e c i s i o n s as t h e y ". . . a f f e c t s u c h d i v e r s e aspects  as the l o c a t i o n of the c o m m u n i t y , i t s s i z e a n d  growth pattern,  the f u n c t i o n s i t p e r f o r m s f o r the l a r g e r s o c i e t y , i t s o c c u p a t i o n a l s i t i o n , its total landuse p a t t e r n , i t s p o w e r and g e n e r a l c h a r a c t e r " (p.  compo-  c l a s s s t r u c t u r e , and i t s  199).  A l t h o u g h the i n f l u e n c e of the b u s i n e s s  f i r m i n the u r b a n e n v i r o n m e n t  29 i s c r u c i a l , l i t t l e r e s e a r c h has  b e e n done to m e a s u r e the e x a c t  dimensions  of t h i s i n f l u e n c e .  S i m o n , r e a l i z i n g the i n a d e q u a c i e s  of m o s t e m p i r i c a l s t u d i e s  on  c o m p a n i e s c a l l s u p o n e c o n o m i s t s to a d o p t a m o r e r i g i d b e h a v i o r a l a p p r o a c h in their We  research: are a l l concerned with human behavior  h e n c e o u r w o r k i s , w h e t h e r we science. behavior  We  in organizations;  c a l l i t s o o r not;  are p a r t i c u l a r l y c o n c e r n e d with  - hence with m a n a g e m e n t functions.  the b e h a v i o r  that o c c u r s  of c o u r s e of a c t i o n , we Human behavior actions and  behavioral  managerial S i n c e m o s t of  i n o r g a n i z a t i o n s i n v o l v e s the  choice  a l l t a k e the d e c i s i o n - m a k i n g a p p r o a c h .  in organizations produces complex inter-  indirect consequences.  (1964, b, pp.  77-78)  F o r the m o s t p a r t , t h i s t h e s i s a d h e r e s to the g u i d e l i n e s s e t f o r t h i n the above quotation.  The  t h e s i s e x a m i n e s one  the f i r m ( m a r k e t i n g s t r a t e g y ) and of m a n a g e r i a l b e h a v i o r  a s p e c t of d e c i s i o n - m a k i n g i n  i n v e s t i g a t e s that p a r t i c u l a r m a n i f e s t a t i o n  in a manner acceptable  to the b e h a v i o r a l  T h i s a p p r o a c h t a k e n h e r e i s i n c o n t r a s t to the m o r e m i c r o - e c o n o m i c methods.  science.  traditional  M o s t r e c e n t l i t e r a t u r e on the t h e o r y of the  f i r m m a k e s i t o b v i o u s that the t r a d i t i o n a l m i c r o - e c o n o m i c a p p r o a c h i s no longer considered world firm.  The  a d e q u a t e e n o u g h to p o r t r a y a u s e f u l p i c t u r e of the traditional theory  'input f a c t o r s ' -- l a b o u r a n d on the o t h e r , p.  11).  'postulates a r e l a t i o n s h i p between  c a p i t a l on the one  h a n d , a n d p h y s i c a l output  t h r o u g h the m e d i u m of a p r o d u c t i o n f u n c t i o n , " ( A n s o f f ,  I n h e r e n t i n the t h e o r y i s the a s s u m p t i o n of a b o u n d l e s s l y  e c o n o m i c man  who  real  m a n i p u l a t e s the f a c t o r s i n v o l v e d a n d who  c o r r e c t d e c i s i o n s i n o r d e r to m a x i m i z e p r o f i t s .  The  1969,  rational  m a k e s a l l the  'rationalistic  30 c o n c e p t s ' ( H i l l & E g a n , 1966) m a j o r c h a r a c t e r i s t i c s : 1)  of the f i r m c a n be d i s t i n g u i s h e d by  an e m p h a s i s on a c t i o n by a c o l l e c t i v e  t h a n by a c t o r s i n a c o l l e c t i v e ;  2)  c l e a r - c u t goal (usually profit maximization); w h i c h c r e a t e s the n e e d f o r a c t i o n (p.  theory.  g r e a t d e a l of c r i t i c i s m has  Ansoff  f i r m s and  rather  the c o m m o n a s s u m p t i o n of p r e d e t e r m i n e d  b e h a v i o r p a t t e r n s w h i c h a r e o r d i n a r i l y p r e s u m e d to be  A  four  4)  rational;  3)  a  an e x t e r n a l e n v i r o n m e n t  15).  b e e n l e v e l e d at the  traditional  (1969) s a y s that the t h e o r y f a i l s to e x p l a i n b e h a v i o r of r e a l  i s not u s e f u l to b u s i n e s s f i r m s i n t h e i r d e c i s i o n m a k i n g .  It has  b e e n a r g u e d that the c o n c e p t of p r o f i t m a x i m i z a t i o n i s  i n c o r r e c t both d e s c r i p t i v e l y and  normatively.  b e c a u s e e m p i r i c a l s t u d i e s of f i r m s  Descriptively,  s h o w that w h i l e f i r m s  . i n d e e d s e e k p r o f i t , t h e y a l s o a p p e a r to s e e k o t h e r  do  objectives.  N o r m a t i v e l y , b e c a u s e of a g r o w i n g c l i m a t e of o p i n i o n that f i r m s should accept other goals for its behavior in addition to p r o f i t .  Due  to the f a c t that i t e x c l u d e s b e h a v i o r a l  informational variables, m i c r o - e c o n o m i c theory no d i f f e r e n t i a t i o n a m o n g f i r m s .  According  to the  theory,  g i v e n a s e t of i n i t i a l e c o n o m i c c o n d i t i o n s , a l l f i r m s behave i d e n t i c a l l y .  W h e r e a s i n a c t u a l f a c t one  1969,  pp.  will  observes  d i f f e r e n c e s of b e h a v i o r a m o n g f i r m s i n the s a m e (Ansoff,  and  provides  environment.  12-13)  In r e p l y ^ A n s o f f  calls for a theory  of the f i r m that i n c l u d e s  " b e h a v i o r a l v a r i a b l e s , " w h i c h d e s c r i b e people and w i t h i n the f i r m ^ as w e l l as  their relationships  "informational v a r i a b l e s " which measure  and  d e f i n e s t a t e s of k n o w l e d g e a b o u t the f i r m a v a i l a b l e to v a r i o u s p a r t i c i p a n t s . He  a l s o t a k e s p a i n s to p o i n t out the g r e a t i m p o r t a n c e i n a n y new  " s t r u c t u r a l v a r i a b l e s " and Ansoff  " s t r a t e g i c v a r i a b l e s " (1969, pp.  (1965) u s e s C h a n d l e r ' s (1962) w o r k on c o r p o r a t e  that the f o r m a n d  d i m e n s i o n s of a n y  corporate  theory  of  12-40).  s t r u c t u r e to s h o w  b u r e a u c r a c y to a l a r g e  extent  31 i n f l u e n c e the b e h a v i o r of the f i r m as a whole as w e l l as i n d i v i d u a l b e h a v i o r i n the f i r m .  B u t C h a n d l e r a l s o says that " s t r u c t u r e f o l l o w s  s t r a t e g y " and to a l a r g e extent s t r a t e g y is dependent upon i n d i v i d u a l s i n the f i r m who p u r s u e s p e c i f i c and often p e r s o n a l g o a l s .  S t a r b u c k (1965)  states that "It would be nice to s a y that some of these goals a r e c h a r a c t e r i s t i c of c e r t a i n types ( f o r m s ) of o r g a n i z a t i o n s and not others C e r t a i n l y such relationships must exist. f r a g m e n t a r y . " (p. 468).  ....  B u t the e x i s t i n g data i s  A l s o , the s t r u c t u r e of the organization's  environ-  ment d e t e r m i n e s the r e l a t i v e e f f e c t i v e n e s s of d i f f e r e n t b e h a v i o r s t r a t e g i e s (Dent, 1959). A s i t appears h e r e , we have a t r i a d of interdependent and i n t e r r e l a t e d v a r i a b l e s -- c h a r a c t e r , s t r u c t u r e , and s t r a t e g y .  Ansoff's m a i n c o n c e r n , h o w e v e r , i s f o r s t r a t e g y .  "In m a n y ways  s t r a t e g i c d e c i s i o n s a r e the b a s i c d e t e r m i n a n t s i n the s u c c e s s of the f i r m f o r , unless the f i r m ' s products a r e a d d r e s s e d to m a r k e t a r e a s i n w h i c h a demand e x i s t s and i n w h i c h the c o m p e t i t i v e c l i m a t e i s f a v o r a b l e , even the best o r g a n i z a t i o n a l f o r m , o r the m o s t b r i l l i a n t c o n t r o l of operations  will  f a i l to p r o d u c e p r o f i t " (1969, p. 15).  A n s o f f has not been the only s o c i a l s c i e n t i s t to note the i l l s of m i c r o - e c o n o m i c theory.  In r e a c t i o n to what A d l i Stevenson c a l l e d " s m a s h  and g r a b i m p e r i a l i s m " some have even stated that the i d e a of p r o f i t m a x i m i z a t i o n i s both i m m o r a l and s o c i a l l y unacceptable (Anthony, 1968). A l t h o u g h few people agree w i t h such an e x t r e m e v i e w , m o s t c a n r e a d i l y see that m i c r o - e c o n o m i c s i s b a s i c a l l y a s t a t i c t h e o r y c o n c e r n e d w i t h  successive  e q u i l i b r i u m conditions and thus not capable of dealing with d i s t i n c t i o n s  32 between s h o r t - and long-range plans.  A l s o , the t h e o r y  does not r e c o g n i z e  the t r a d e o f f b e t w e e n i n v e s t m e n t s f o r c u r r e n t p r o f i t a n d t h o s e f o r f u t u r e profit (Cyert & March, corporate  1963).  Some economists have offered alternative  g o a l s t o r e p l a c e p r o f i t m a x i m i z a t i o n . * O n e o f the m o r e  i n t e r e s t i n g r e p l a c e m e n t t h e o r i e s i s that p u t f o r t h b y B a u m o l who  claims  that "a v a r i e t y o f g o a l s a r e a p t to i n f l u e n c e the o p e r a t i o n o f a n y c o m p a n y i n a m a n n e r w h i c h i s n o t p r e c i s e l y s p e c i f i e d n o r c l e a r l y d e t e r m i n e d (1964, p.  323). H e h i m s e l f b e l i e v e s that c o m p a n y g r o w t h o b t a i n e d  through  i n c r e a s e d s a l e s v o l u m e at the e x p e n s e o f p r o f i t i s b o t h the p r i m e o b j e c t i v e and  m o d u s o p e r a n d i o f m a n y f i r m s he h a s s t u d i e d (1959).  B a u m o l goes as  f a r a s s t a t i n g that f i r m s e m b a r k o n a n i m p l i c i t p o l i c y o f p r o f i t c o n s t r a i n t i n o r d e r t o f u l f i l l the a s p i r a t i o n s o f s o m e m a n a g e r i a l g r o u p s to e x p a n d the f i r m ' s s h a r e o f the m a r k e t .  Market share, rising sales volume, and  m u l t i p l i c i t y of p r o f i t s a r e not s y n o n y m o u s with p r o f i t .  In a s i m i l a r v e i n ,  it i s i n t e r e s t i n g to note that R o b e r t s (1956) f o u n d that the s a l a r y o f the highest paid executive  i s i n d e p e n d e n t o f the f i r m ' s p r o f i t ; a n d i n c r e a s e d  e x p o n e n t i a l l y w i t h the f i r m ' s s a l e s v o l u m e ( M a r c h , 1965, p . 4 5 5 ) . B a u m o l ' s ideas a r e appealing has  and persuasive  but a s y e t n o t e n o u g h e m p i r i c a l d a t a  b e e n g a t h e r e d to c o n c l u s i v e l y s u p p o r t h i s s t a t e m e n t s .  D r u c k e r (1958) a l s o d i s c o u n t s  p r o f i t m a x i m i z a t i o n a s the p r i m a r y  g o a l o f b u s i n e s s f i r m s a n d s u g g e s t s that s u r v i v a l i s the c e n t r a l p u r p o s e . S t a r b u c k (1965) s u p p o r t s t h i s p o i n t a n d c l a i m s  that s u r v i v a l i s the o n l y  true  I S e e S o l o m o n (1963) f o r m a x i m i z a t i o n of n e t w o r t h a n d B e r a n e k (1963) f o r m a x i m i z a t i o n of m a r k e t  value.  33 m e a s u r e o f a f i r m ' s e f f i c i e n c y (p. 4 6 3 ) . T h e p r o b l e m w i t h t h i s i d e a a s w i t h m a n y o t h e r s i s that the ' r e a l w o r l d ' f i r m d o e s n o t a p p e a r to h a v e one main goal or objective. of g o a l s .  M o s t f i r m s s e e m to have a v e r y c o m p l e x  system  T h e r e a r e g o a l s f o r the f i r m a s a w h o l e , g o a l s f o r g r o u p s i n the  f i r m , and individual goals.  A l l of these a r e i n t e r t w i n e d ,  c o m p l i m e n t i n g one a n o t h e r , s o m e t i m e s i n c o n f l i c t .  sometimes  T h e h e i r a r c h y of g o a l s  m a y c o n s t a n t l y shift depending upon the o r g a n i z a t i o n a l s t r u c t u r e , e n v i r o n m e n t , a n d p e r s o n a l i t y d o m i n a n c e o f the a c t o r s i n the f i r m .  C y e r t a n d M a r c h (1963) i n v e s t i g a t e i n d e p t h the behavior "has  o f the f i r m .  decision-making  T h e y , t o o r e a l i z e that t r a d i t i o n a l e c o n o m i c  theory  n o t b e e n a d e q u a t e t o c o p e w i t h o l i g o p o l i s t i c m a r k e t s " (p. 115). T h e i r  a l t e r n a t i v e to t h i s t h e o r y c o m e s i n the f o r m o f a d e s c r i p t i o n of how world' f i r m s function and make decisions.  'real  T h e i m a g e they p r o d u c e i s m u c h  d i f f e r e n t f r o m the one p r o j e c t e d i n ' r a t i o n a l ' e c o n o m i c t h e o r y .  Their  a c t o r , the f i r m , i s m e r e l y a m a n i f e s t a t i o n o f m a n y i n d i v i d u a l a c t o r s . The  f i r m ' s a c t i o n s a r e not a l w a y s e c o n o m i c a l l y  it s t r i v e s f o r a l w a y s t h o s e p r o f e s s e d . A  B e h a v i o r a l T h e o r y o f the F i r m ,  r a t i o n a l , n o r a r e the g o a l s  T h e m a i n point i n t h e i r book,  i s that the m a n i f e s t  f i r m c a n o n l y be r a t i o n a l i z e d w h e n the b e h a v i o r  behavior  of a n y  of the i n d i v i d u a l s i n the  f i r m is examined.  F o l l o w i n g c l o s e l y o n t h i s t h e m e i s the w o r k o f S i m o n (1957a a n d b , 1959,  I 9 6 0 , 1964a a n d b) w h o s t a t e s that the c e n t r a l c o n c e r n o f a d m i n i s t r a -  t i v e t h e o r y i s w i t h the b o u n d a r y b e t w e e n r a t i o n a l a n d n o n - r a t i o n a l of h u m a n s o c i a l b e h a v i o r .  Administrative behavior  aspects  i s p e c u l i a r l y of t h e  j  34 theory  of intended  a n d b o u n d e d r a t i o n a l i t y of the b e h a v i o r of h u m a n b e i n g s  who  s a t i s f i c e b e c a u s e t h e y do not h a v e the c a p a c i t y to m a x i m i z e (1964, b).  The  f i r m m a y be d e s c r i b e d a s a p a t t e r n of r e l a t i o n s h i p s a m o n g i n d i v i d u a l s ,  n o n e of w h o m a c t w i t h p e r f e c t r a t i o n a l i t y , but a l l of w h o m a t t e m p t to be a s r a t i o n a l a s p o s s i b l e w i t h i n the l i m i t s s e t f o r t h e m b y t h e i r p e r s o n a l i t i e s and  b y the e n v i r o n m e n t .  The f i r m becomes an imperfect  decision-making  m a c h i n e , f o r c e d to c h o o s e b e t w e e n a l t e r n a t i v e s w i t h o u t k n o w i n g e x a c t l y w h a t the r e s u l t s o f e a c h c h o i c e w i l l be.  U n d e r such conditions it becomes  e v i d e n t that m e n i n b u s i n e s s c a n n o t k n o w the b e s t a l t e r n a t i v e i n a l l c a s e s where choices  m u s t be m a d e ; t h e y c a n n o t t h e r e f o r e m a x i m i z e  anything.  W h a t b u s i n e s s m e n m u s t s t r i v e f o r i s not m a x i m u m p r o f i t s ^ but r a t h e r f o r behavior patterns  that p r o d u c e s a t i s f a c t o r y c o n c l u s i o n s .  In a d i s c u s s i o n  of t h e s e i d e a s M c G u i r e (1966) s t a t e s that S i m o n ' s c o n c e p t of the f i r m " r e s t s m o r e s e c u r e l y u p o n the b a s e of r e a l i t y t h a n do, f o r e x a m p l e , t h e e c o n o m i c notions  of the f i r m " ( H i l l & E g a n , 1966,  p. 22).  In s u m m a r y , the f i r m c a n be r e g a r d e d a s h a v i n g the f o l l o w i n g features:  1) i t i s the a c t o r s w i t h i n the f i r m ^ r a t h e r t h a n the f i r m i t s e l f ^  that a c t s ;  2) that b e h a v i o r i s c o n d i t i o n e d b y p e r s o n a l i t y a s w e l l a s  environment factors;  3) that a s a m i n i m u m ^ the b e h a v i o r a l  e x a m i n e d m u s t take i n t o a c c o u n t the c o g n i t i o n , p e r c e p t i o n , k n o w l e d g e of the a c t o r s ; (McGuire,  processes beliefs^ and  4) that r e w a r d s a n d g o a l s a r e o f t e n  complex  1961).  Behavioral Variables in Decision-Making A t l e a s t t h r e e b a s i c v a r i a b l e s c a n be i d e n t i f i e d i n a n y d i s c u s s i o n  35 of d e c i s i o n - m a k i n g .  Character. that m a k e up a n d  These are,  Character  c h a r a c t e r , s t r u c t u r e , and  may  be d e f i n e d as  strategy.  'the a t t r i b u t e s o r f e a t u r e s  d i s t i n g u i s h the i n d i v i d u a l " ( W e b s t e r , 1967).  Since it is  v i r t u a l l y i m p o s s i b l e to d e s c r i b e a l l the f e a t u r e s o r a t t r i b u t e s of c h a r a c t e r a few  b a s i c ones a r e u s u a l l y c h o s e n .  This procedure is followed in  p s y c h o l o g y , s o c i o l o g y , e t c . as w e l l as the p h y s i c a l s c i e n c e s , f o r w h a t i s r e a l l y b e i n g done i s a p r o c e s s  The  of c a t e g o r i z a t i o n .  d i f f i c u l t y i n d i s c u s s i n g the c h a r a c t e r of the  decision-maker  l i e s i n the i s o l a t i o n a n d m e a s u r e m e n t of c h a r a c t e r i s t i c t r a i t s that w i l l be s e n s i t i v e e n o u g h to i d e n t i f y e v e r y i n d i v i d u a l , but a l l o w e n o u g h f l e x i b i l i t y that a c t o r s of l i k e c h a r a c t e r c a n be e a s i l y g r o u p e d . u s u a l l y c l o s e l y a s s o c i a t e d with behavior, also exhibit s i m i l a r  Because character is  a c t o r s of s i m i l a r c h a r a c t e r  should  behavior.  In a d i s c u s s i o n of l o c a t i o n a l d e c i s i o n - m a k e r s P r e d the a m o u n t of i n f o r m a t i o n p o s s e s s e d  s u g g e s t s that  b y a n a c t o r a n d the a b i l i t y to u s e  that  i n f o r m a t i o n i s s u f f i c i e n t to c a t e g o r i z e d e c i s i o n - m a k e r s a c c o r d i n g to the above g u i d e l i n e s . . . . every  l o c a t i o n a l d e c i s i o n i s v i e w e d as o c c u r r i n g u n d e r  c o n d i t i o n s of v a r y i n g i n f o r m a t i o n a b i l i t y , r a n g i n g , at l e a s t t h e o r e t i c a l l y , f r o m n u l l to p e r f e c t k n o w l e d g e of a l l a l t e r n a t i v e s , as b e i n g g o v e r n e d by a l l v a r y i n g a b i l i t i e s (as w e l l as of the d e c i s i o n - m a k e r s .  In the b e h a v i o r a l m a t r i x ,  objectives)  the  informa-  t i o n v a r i a b l e i s d e p i c t e d on the v e r t i c a l a x i s , and the a b i l i t y to a c t v a r i a b l e , w h i c h t h e o r e t i c a l l y v a r i e s f r o m t o t a l i n e p t i t u d e to an aptitude f o r o p t i m a l s o l u t i o n , i s r e p r e s e n t e d axis.  The  locational decision-making  on the h o r i z o n t a l  u n i t o r a c t o r , be i t a  s i n g l e p e r s o n o r a f i r m , c a n be t h o u g h t of j o i n t l y h a v i n g a s p a t i a l a t t r i b u t e (site and  situation, land use,  m o v e m e n t ) that is r e p r o d u c a b l e  real  o r p a t t e r n of  ( c o n v e y a b l e ) on a map,  and  36 b e h a v i o r a l q u a l i t i e s that can be h y p o t h e t i c a l l y l o c a t e d i n the b e h a v i o r a l m a t r i x . ( P r e d , 1967, p. 24)  P r e d n e v e r suggests any m e a s u r e m e n t techniques f o r h i s two c h a r a c t e r i s t i c s nor does he o f f e r any e m p i r i c a l data to support his s t a t e ments.  However^ C l a u s (1969) i n a study of c o r p o r a t e  decision-makers  does p r e s e n t r i g i d i n s t r u m e n t a t i o n and concrete e m p i r i c a l data to back h i s hypothesis that a c t o r s ( f i r m s ) can be d i s t i n g u i s h e d by t h e i r i n f o r m a t i o n  and  a b i l i t y to act and that these c h a r a c t e r i s t i c s c o r r e l a t e v e r y h i g h l y w i t h the individual firm's locational behavior.  C l a u s d e m o n s t r a t e d that as the  o l i g o p o l i s t ' s i n f o r m a t i o n and a b i l i t y to act on that i n f o r m a t i o n i n c r e a s e d , so did the q u a l i t y of site that was  chosen.  It i s not c l a i m e d that i n f o r m a t i o n and a b i l i t y to act a r e the only c h a r a c t e r i s t i c s by w h i c h a d e c i s i o n - m a k e r may i s conceivable that c e r t a i n c i r c u m s t a n c e s  be c l a s s i f i e d .  Indeed, i t  and c e r t a i n d e c i s i o n - m a k e r s w i l l  n e c e s s i t a t e some other m e a s u r e m e n t of c h a r a c t e r .  It has a l r e a d y been  suggested that r o l e a n a l y s i s ( G r o s s et a l , 1964} and attitude o r p e r c e p t i o n ( H a r v e y , 1969) may  be adequate to d i s t i n g u i s h the c h a r a c t e r of the  locational decision-maker.  The p r o b l e m with these m e a s u r e s of c h a r a c t e r ^ as with i n f o r m a t i o n and a b i l i t y to a c t , l i e s i n the d i f f i c u l t y of v a l i d r e s e a r c h d e s i g n .  As  (1969) s t a t e s : We know that d e c i s i o n s are affected by a t t i t u d e s , d i s p o s i t i o n s , p r e f e r e n c e s , and the l i k e . We know, too, that m e n t a l p r o c e s s e s may mediate the flow of i n f o r m a t i o n f r o m the e n v i r o n m e n t i n s u c h a way that one i n d i v i d u a l p e r c e i v e s a s i t u a t i o n d i f f e r e n t l y f r o m another even though the e x t e r n a l s t i m u l i a r e the s a m e . (p. 36).  Harvey  37 H a r v e y i s r e a l l y v o i c i n g a r e c o g n i t i o n that m a n y f a c t o r s i n t e r n a l to the a c t o r h i m s e l f m a y individual's character. a b o u t how  As  people perceive  information  i t now  prevent accurate  the  stands, v e r y little is actually known  the e n v i r o n m e n t a n d  to a c h i e v e the g o a l s t h e y d e s i r e .  m u s t be done b e f o r e  m e a s u r e m e n t on  how  they use  their  perceived  It i s o b v i o u s that m o r e w o r k  the e f f e c t s of the d e c i s i o n - m a k e r ' s c h a r a c t e r  on  the  landscape is truly understood.  Structure.  To  hold participants together  c o m m o n p r o g r a m s of a c t i v i t y a n d  i n the c o m p l e t i o n of  i n p u r s u i t of g o a l s , m o s t b u s i n e s s  have developed r e l a t i v e l y stable i n t e r n a l s t r u c t u r e s . of s u c h o r g a n i z a t i o n s  Most research  s t r e s s a h i e r a r c h i c a l o r d e r i n g of a u t h o r i t y  r e s p o n s i b i l i t y , c a r e f u l s p e c i f i c a t i o n of t a s k s to be p e r f o r m e d a n d p o s i t i o n s to be f i l l e d , f o r m a l and  a c t i o n s , and  1965,  p.  a g r e a t m a n y t h e o r i e s h a v e b e e n put  school, outlined his "typology  and  "structuralist"  of a u t h o r i t y " w h i c h d e f i n e d the  c o d i f y b e h a v i o r i n e a c h o f f i c e of the o r g a n i z a t i o n .  He  "ideal-type"  of r u l e s w h i c h  is p r i m a r l y  i n the b u r e a u c r a c y ( f i r m ) as a f u n c t i o n a l s t r u c t u r e , w h i c h he by r a t i o n a l l a w s i n t o an o r g a n i z a t i o n .  that to be e f f e c t i v e a n d  s i z e of  forward.  C e n t r a l to W e b e r ' s t h e o r y i s the e x i s t e n c e  be b o u n d t o g e t h e r  decisions  1096).  W e b e r (1947), the m o s t i n f l u e n t i a l w r i t e r i n the  bureaucracy.  of  t h r o u g h the  c o p e w i t h the d i v e r s i t y i n the s t r u c t u r e , t y p e ,  organizations  studies  and  r e g u l a t i o n s to g o v e r n m a n y  c h a n n e l s f o r the r o u t i n g of i n f o r m a t i o n  organization (Dill,  To  r u l e s and  firms  interested  considers  to  Weber suggested  e f f i c i e n t as a n o r g a n i z a t i o n a l i n s t r u m e n t , a m o d e r n  38 organizational structure requires bureaucratic relations lack any systematic stability (Etzioni,  authority.  d i v i s i o n of l a b o u r ,  Charismatic  specialization,or  1964, p. 52).  W e b e r i s v e r y n o r m a t i v e i n his a p p r o a c h and i s o p p o s e d by those i n the " c l a s s i c a l " s c h o o l a n d the " h u m a n r e l a t i o n s " s c h o o l . organization theory,  Classical  a s f i r s t s t a t e d by G u l i c k a n d U r w i c k (1937), r e s t s o n  the a s s u m p t i o n that t h e m o r e a p a r t i c u l a r j o b c a n be b r o k e n d o w n i n t o i t s s i m p l e s t p a r t s , the m o r e s p e c i a l i z e d a n d c o n s e q u e n t l y the m o r e s k i l l e d a worker can become. as r e p r e s e n t e d  Following  o n t h i s l i n e , the n e o - c l a s s i c a l a p p r o a c h ,  by S i m o n , S m i t h b u r g a n d T h o m p s o n (1959), p a y s  s i d e r a b l e attention to f o r m a l  con-  s t r u c t u r e a n d to r a t i o n a l c o n s i d e r a t i o n s ; i t  d i f f e r s f r o m the s t r u c t u r a l i s t a p p r o a c h i n s t u d y i n g the a c t u a l w a y s (or  values  g o a l s a n d s u b g o a l s ) o f a n o r g a n i z a t i o n c a n be a n d a r e i m p l e m e n t e d .  " h u m a n r e l a t i o n " a p p r o a c h as e x e m p l i f i e d as f o l l o w s :  The  b y L e w i n (1952) c a n be s u m m a r i z e d  1) the a m o u n t o f w o r k c a r r i e d out by a w o r k e r i s n o t d e t e r -  m i n e d b y h i s p h y s i c a l c a p a c i t y but h i s s o c i a l " c a p a c i t y ; "  2)  r e w a r d s p l a y a c e n t r a l r o l e i n d e t e r m i n i n g the m o t i v a t i o n  and h a p p i n e s s of  the w o r k e r ;  the m o s t e f f i c i e n t  3) the h i g h e s t s p e c i a l i z a t i o n i s b y n o m e a n s  f o r m of the d i v i s i o n of l a b o u r ; a n d  noneconomic  4) w o r k e r s do n o t r e a c t t o m a n a g e m e n t  a n d i t s n o r m s a n d r e w a r d s a s i n d i v i d u a l s but a s m e m b e r s of a g r o u p .  E m p i r i c a l s t u d i e s on o r g a n i z a t i o n a l s t r u c t u r e have t e n d e d to r e l y on W e b e r ' s b a s i c f o r m u l a t i o n  2  and  of b u r e a u c r a t i c  heirarchy.  2  Like  corporate  H a l l (1962, p . 396) l i s t s M e r t o n , U d y , H e a d y , P a r s o n s ,  Bergen,  L i t w a k a s p r o m i n e n t a u t h o r i t i e s i n t h i s f i e l d who h a v e u s e d W e b e r ' s  a p p r o a c h to b u r e a u c r a c y .  39 c h a r a c t e r , c o r p o r a t e s t r u c t u r e i s t r o u b l e d by a l a c k of methods and techniques to s c a l e s t r u c t u r e behavioral research.  The  i n a f a s h i o n that i s acceptable to sound  l i t e r a t u r e contains s e v e r a l e x a m p l e s of  techniques f o r m e a s u r i n g s t r u c t u r e ( H a l l , 1962; B l a u & Scott, M a r c h , 1965  1962;  -- e s p e c i a l l y chapters on r e s e a r c h methodology), but e a c h  e m p i r i c a l r e s e a r c h design has been m o d e l e d to test a s p e c i f i c h y p o t h e s i s .  It w o u l d appear that the b e h a v i o r of a f i r m may context of its b u r e a u c r a c y .  be e x a m i n e d i n the  " D i f f e r e n t types of b e h a v i o r and i n t e r p e r s o n a l  r e l a t i o n s h i p s are expected at d i f f e r e n t h i e r a r c h i c a l l e v e l s and these d i f f e r e n c e s would appear to influence the s t r u c t u r e " ( H a l l , 1962, The  p.  397).  c o n v e r s e has a l s o been o b s e r v e d where s t r u c t u r e has a d e f i n i t e  influence on the b e h a v i o r of i n d i v i d u a l s w i t h i n the o r g a n i z a t i o n ( F o r m , 1954; C h a n d l e r , 1962).  In g e n e r a l i t can be s a i d that v a r y i n g degrees of b u r e a u c r a t i z a t i o n " c e r t a i n l y have c o n c o m i t a n t effects on other o r g a n i z a t i o n phenomena s u c h as p a r t i c i p a n t ' s b e h a v i o r , e f f e c t i v e n e s s of g o a l - a t t a i n i n g e n d e a v o r s , and r e l a t i o n s w i t h the e x t e r n a l e n v i r o n m e n t both i n t e r m s of i n d i v i d u a l s and other o r g a n i z a t i o n s " ( H a l l , 1962,  Strategy.  p.  402).  A s t r a t e g y i s a means of s e c u r i n g a g o a l .  Or as K e l l e y  puts i t , "Strategy . . . c o n s i s t s of long t e r m plans of a c t i o n designed to s e c u r e long t e r m e n d s " (1968, p. 9).  In the business w o r l d the t e r m  3 B e c a u s e there i s no s t a n d a r d m e a s u r e m e n t s c a l e f o r b u r e a u c r a t i c s t r u c t u r e the f i r s t task of the r e s e a r c h e r i s to e s t a b l i s h some v i a b l e unit of m e a s u r e m e n t (dimension) f o r s c a l i n g the phenomena.  40 strategy  c a n h a v e two m e a n i n g s .  A pure strategy  is a move o r a s p e c i f i c  s e r i e s of m o v e s by a f i r m s u c h as a p r o d u c t d e v e l o p m e n t p r o g r a m i n w h i c h s u c c e s s i v e products and m a r k e t s a r e delineated, strategy  is a statistical decision  strategy  the f i r m s h o u l d s e l e c t ( A n s o f f ,  The involve  t e r m strategy  short-run decisions  and a grand or mixed  rule for deciding  which particular pure  1965).  s h o u l d n o t be c o n f u s e d w i t h t a c t i c s .  Tactics  that a r e n o t c r u c i a l t o the s u r v i v a l o f the f i r m .  " T h e y a r e q u i c k l y m a d e a d j u s t m e n t s to a r a p i d l y c h a n g i n g m a r k e t e n v i r o n m e n t o c c a s i o n e d b y the a c t i o n of a c o m p e t i t o r , g o v e r n m e n t b o d y , c h a n g e i n the c o n s u m e r ' s s t a t u s  a t t i t u d e s , a n d the l i k e " ( K e l l e y ,  O n the o t h e r h a n d , s t r a t e g i c d e c i s i o n s  1968, p . 10).  c o m m i t m a j o r r e s o u r c e s o f the f i r m  f o r a r e l a t i v e l y l o n g t i m e a n d r e f l e c t t h e b a s i c g o a l s of t h e b u s i n e s s .  A precise  t e r m often u s e d i n t e r c h a n g e a b l y with s t r a t e g y  is p o l i c y .  In i t s  f o r m , p o l i c y has c o m e to m e a n a s p e c i f i c r e s p o n s e to s p e c i f i c  repetitive situations.  A policy is usually an explicit written  statement of  p r o c e d u r e t o be i m p l e m e n t e d w h e n a p a r t i c u l a r s i t u a t i o n a r i s e s .  "Policy  i s a c o n t i n g e n t d e c i s i o n " ( A n s o f f , 1965, p . 119). S t r a t e g y , h o w e v e r , i s u s u a l l y i m p l i c i t a n d t a k e s the f o r m o f a c o u r s e o f a c t i o n . are  the m e a n s b y w h i c h a s t r a t e g y  Policy  statements  is instituted and m a n o e u v e r e d .  S i n c e s t r a t e g i e s a r e a m e a n s to a c h i e v i n g g o a l s a n d s i n c e can  be p e r s o n a l a s w e l l a s c o l l u s i v e , i t f o l l o w s  goals  that s t r a t e g i e s a r e  e x t r e m e l y c o m p l e x i n n a t u r e a n d a r e i n c o n s t a n t i n t e r a c t i o n w i t h one another.  A c t o r s w i t h s i m i l a r g o a l s m a y e m p l o y d i f f e r e n t s t r a t e g i e s to  41 a c h i e v e t h e i r e n d s ; o n the o t h e r h a n d , a c t o r s w i t h e n t i r e l y u n r e l a t e d g o a l s may  employ identical strategies.  Firms  and i n d i v i d u a l s a t t e m p t i n g to  s e c u r e t h e i r own goals c o m e into d i r e c t c o n f l i c t with o p p o s i n g  strategies.  T h i s i s p a t e n t l y o b v i o u s i n the b u s i n e s s w o r l d w h e r e the g o a l m a y c a p t u r e p a r t of a c o m p e t i t o r ' s m a r k e t . the p r e m i s e  that m a r k e t i n g  In f a c t , f r e e e n t e r p r i s e i s b u i l t o n  s t r a t e g i e s do e x i s t a n d w i l l c o m e i n t o c o n f l i c t .  It i s i n t e r e s t i n g to o b s e r v e how  corporate management uses  s t r a t e g y to c h a n g e the e n v i r o n m e n t a n d how e n v i r o n m e n t a l a shift i n strategy.  be to  The modern f i r m may  change  causes  be v i e w e d a s a " p u r p o s i v e ,  g o a l - s e e k i n g o r g a n i z a t i o n " ( A n s o f f , 1969, p . 14) w h i c h i s d e s i g n e d a n d g u i d e d by a m a n a g e m e n t .  T h e m a n a g e m e n t p r o c e s s i t s e l f c o n s i s t s of t h r e e  l e v e l s of d e c i s i o n - m a k i n g :  operations, a d m i n i s t r a t i o n , and strategy.  Operating or logistics decisions are concerned f u n c t i o n i n g of the f i r m .  w i t h the p h y s i c a l  S u c h things as a c c o u n t i n g , o r d e r i n g , b i l l i n g ,  p r o c e s s i n g , e t c . a r e h a n d l e d by o p e r a t i o n a l d e c i s i o n s . M o s t of these situations a r e g o v e r n e d by explicit routine p r o c e d u r e merely  a n d the d e c i s i o n s a r e  a j o b of d i s c r i m i n a t i n g k e y c r i t e r i a .  Administrative decisions are concerned of j o b r e s p o n s i b i l i t y a n d d u t y .  w i t h the s t r u c t u r a l p a t t e r n  T a s k s a r e designated and operations a r e  s e e n to be c o - o r d i n a t e d a n d e f f i c i e n t .  Persons  o c c u p i e d with this l e v e l of  management process are responsible f o rexecuting strategic decisions using policy statements  "The  as g u i d e l i n e s .  strategic decision a r e a is concerned  with e s t a b l i s h i n g the  42 r e l a t i o n s h i p b e t w e e n the f i r m a n d  its e n v i r o n m e n t " (Ansoff,  1969,  p.  14).  T h e s e d e c i s i o n s e s t a b l i s h the f u n d a m e n t a l l i n k s b e t w e e n a c o r p o r a t i o n a n d , the o u t s i d e w o r l d . resource  Q u e s t i o n s like what p r o d u c t ? what m a r k e t ?  a l l o c a t i o n s ? are dealt with in s t r a t e g i c d e c i s i o n s .  what  Strategy is  the b a s i c d e t e r m i n a n t i n the s u c c e s s o r f a i l u r e of the f i r m .  B e c a u s e of t h e i r i m p o r t a n c e , i t w o u l d s e e m that s t r a t e g i c d e c i s i o n s should  r e c e i v e top m a n a g e m e n t ' s h i g h e s t p r i o r i t y .  h o w e v e r , s h o w s us that t h i s i s not the c a s e .  Historical analysis,  Management manifests  interest i n strategy only p e r i o d i c a l l y (Chandler, e x h i b i t a 'lag r e s p o n s e ' to e n v i r o n m e n t a l c h a n g e .  1962).^  Many firms  Only when c u r r e n t strategies are  r e s p o n s i b l e f o r f a i l u r e d o e s the c o m p a n y s h i f t i t s m o d u s  o r g a n i z a t i o n a l r e s h u f f l e , and f i n a l l y t h r o u g h s t r a t e g i c  operandi.  ^In S t r a t e g y and concentrates O i l of New  c a d r e of the  M a n a g e m e n t i n v a r i a b l y t e n d s to g i v e  Structure, Chandler presents  a n a l y s i s of the g r o w t h and  then i n  overhaul.  P o w e r of a l l t h r e e l e v e l s of d e c i s i o n r e s i d e s i n one -- top m a n a g e m e n t .  an  historical  d e v e l o p m e n t of a n u m b e r of f i r m s ,  but  on G e n e r a l M o t o r s , D u P o n t , S e a r s - R o e b u c k , a n d  Jersey.  should provide  The  a  s e e n to be  T y p i c a l l y the f i r m s e e k s i t s c u r e by a c h a n g e i n o p e r a t i o n s ,  organization  also  S u c h f i r m s f a i l to  a n t i c i p a t e o r r e a c t to a n e n v i r o n m e n t a l c h a n g e w h i c h n e c e s s i t a t e s modification in strategy.  an  m a i n p o i n t of the b o o k i s that c o r p o r a t e  Standard structure  an a d m i n i s t r a t i v e e n v i r o n m e n t i n w h i c h a p r o p e r b a l a n c e  of m a n a g e m e n t a t t e n t i o n c a n be  maintained.  43 operating d e c i s i o n s top p r i o r i t y . ^ It i s f o r this r e a s o n that e n v i r o n m e n t changes a r e p e r c e i v e d i n d i r e c t l y through the i m p a c t that they have on the logistic process.  D e c i s i o n needs s i g n a l l e d by the l o g i s t i c p r o c e s s e s a r e  a n a l y z e d s e r i a l l y , i n i t i a l l y as operating d e f i c i e n c i e s , s e c o n d l y as a d m i n i s t r a t i v e , and t h i r d l y as s t r a t e g i c (Ansoff, 1969,  p.  17).  A l t h o u g h s e r i a l d e c i s i o n - m a k i n g i s c h a r a c t e r i s t i c of m o s t b u s i n e s s f i r m s , there are other methods of p e r c e i v i n g e n v i r o n m e n t a l change. reduce 'lag r e s p o n s e ' f i r m s may  To  practice anticipatory response i n which  the f i r m s e e k s through f o r w a r d planning to f o r e s e e s i g n i f i c a n t changes i n the e n v i r o n m e n t .  H e r e the f i r m ' s contact with the outside w o r l d i s d i r e c t  and r e s p o n s e to s t r a t e g i c challenge i s q u i c k e r .  E v e n m o r e advanced i s  s e l f - t r i g g e r e d r e s p o n s e where the f i r m i s c o n t i n u a l l y s e a r c h i n g f o r g r o w t h and e x p a n s i o n o p p o r t u n i t i e s .  The  c o m p l e x i t y of this t o p i c i s i n c r e a s e d when one r e a l i z e s that  the l i t e r a t u r e o f f e r s no typology of s t r a t e g y ; i n f a c t , m o s t f i r m s a r e unaware of the fact that they f o l l o w a p a r t i c u l a r c o r p o r a t e s t r a t e g y . (1969) m a k e s a p l e a f o r e x p l i c i t c o r p o r a t e  Tilles  strategy:  The need f o r an e x p l i c i t s t r a t e g y s t e m s f r o m two key a t t r i b u t e s of the b u s i n e s s o r g a n i z a t i o n : f i r s t , that s u c c e s s depends on people w o r k i n g together so that t h e i r e f f o r t s a r e m u t u a l l y r e i n f o r c i n g ; and s e c o n d , that this be a c c o m p l i s h e d in the context of r a p i d l y changing c o n d i t i o n s . In the absence of an e x p l i c i t statement of s t r a t e g y , obsolete patterns of c o r p o r a t e b e h a v i o r are e x t r a o r d i n a r i l y d i f f i c u l t to m o d i f y .  ^ A n s o f f (1969) gives four r e a s o n s why operating d e c i s i o n s r e c e i v e p r i o r i t y : 1) they a r e routine and r e p e t i t i v e , 2) they are a u t o m a t i c a l l y brought to top m a n a g e r s attention by l o w e r m a n a g e r s , 3) they are frequent and i n l a r g e n u m b e r , 4) top m a n a g e r s find them f a m i l i a r by v i r t u e of t r a i n i n g at l o w e r l e v e l s i n the f i r m (pp. 15-16).  44 Where there i s no c l e a r concept of what c u r r e n t strategyi s , the d e t e r m i n a t i o n of what might be changed, and why, m u s t r e s t on e i t h e r s u b j e c t i v e o r i n t u i t i v e a s s e s s m e n t , (p. 181)  A l t h o u g h T i l l e s requests that s t r a t e g y should be a f o r m a l , e x p l i c i t statement, he n e v e r p r e s e n t s a typology of the d i f f e r e n t k i n d s of s t r a t e g i e s that a f i r m may  adopt.  The l i t e r a t u r e d i s c u s s e s a whole h o s t of s t r a t e g i c  d e c i s i o n p r o c e s s e s , r a n g i n g f r o m the i m p o r t a n t p r o d u c t - m a r k e t  mix  (Sloan, 1964; B o r d e n , 1964) to i n t e l l i g e n c e and a n t i - e s p i o n a g e s t r a t e g i e s ( K e l l e y , 1968).  M a r k e t i n g s t r a t e g y i s only one of the many types of  s t r a t e g i e s i n w h i c h a c o r p o r a t i o n may  engage i t s e l f .  The f i e l d of  m a r k e t i n g s t r a t e g y i s of s p e c i a l c o n c e r n to c o m p a n i e s who  a r e engaged  d i r e c t l y i n the r e t a i l i n g of goods and s e r v i c e s .  Marketing Strategy A f i r m engaged i n m a r k e t i n g i s a c u t e l y a w a r e of the  environment.  A s s t a t e d e a r l i e r , the m o r e unstable the m a r k e t b e c o m e s the m o r e a f i r m has to adjust i t s s t r a t e g y . T h i s i s e s p e c i a l l y t r u e i n the p r e s e n t r e t a i l i n g m a r k e t where c u s t o m e r s a r e better i n f o r m e d , have m o r e money, and demand w i d e r ranges and v a r i e t i e s of p r o d u c t s .  In o r d e r to compete  s u c c e s s f u l l y the management m u s t keep i t s eye on the m a r k e t i n a n t i c i p a t i o n of a d v e r s e c o m p e t i t i v e t a c t i c s and s t r a t e g i e s . can make or break a f i r m .  Today, marketing strategy  F o r e x a m p l e , the s u c c e s s of the W i l k i n s o n  r a z o r blade and P l a y b o y i l l u s t r a t e s the d r a m a t i c i m p a c t that a new concept may  have on the fortunes of a company ( T i l l e s , 1969).  product  Mere  45 t e n a c i t y c a n o c c a s i o n a l l y be the c o r r e c t f o r m u l a . ^  W h a t e v e r the w i n n i n g c o m b i n a t i o n m a y  b e , the m a r k e t i n g  sector  of a c o r p o r a t i o n i s u s u a l l y f i r s t to n o t i c e a c h a n g e i n e n v i r o n m e n t a l conditions.  It i s quite p r o b a b l e that m a r k e t i n g s t r a t e g i e s , i n t u r n , h a v e  the m o s t i m m e d i a t e e f f e c t o n the e n v i r o n m e n t .  In a n a r t i c l e e n t i t l e d ,  " m a r k e t i n g M y o p i a , " L e v i t t (I960) s a y s that  e v e n when e n t e r p r i s e s b e c o m e s u c c e s s f u l they a r e apt to s l u m p b e c a u s e of their indulgence i n outmoded marketing strategies.  L e v i t t notes four  c o n d i t i o n s that t e n d t o f o s t e r d e c a y i n the m i d s t of p l e n t y : population growth, product,  2) c o n f i d e n c e  1) r e l i a n c e o n  i n the i n f a l l i b i l i t y o f one's  current  3) r e l i a n c e o f c o s t e f f i c i e n c i e s of m a s s p r o d u c t i o n ,  occupation  4)  pre-  w i t h p r o d u c t s that l e n d t h e m s e l v e s t o c a r e f u l l y c o n t r o l l e d  scientific experimentation, improvement, and manufacturing cost  reduction.  n  O f the l a r g e b o d y of l i t e r a t u r e few  strategy  a u t h o r s u s e the s a m e g e n e r i c h e a d i n g to c l a s s i f y the t y p e s o f s t r a t e g i c ^An  Corporation  excellent example i s provided  b y the c a s e o f the S y l v a n i a  i n i t s s u c c e s s i n f l u o r e s c e n t l i g h t s t a r t e r s . A t the t i m e a  s e l f - s t a r t i n g unit was i n t r o d u c e d , item  that e x i s t s o n m a r k e t i n g  of l o w p r o f i t a b i l i t y .  light s t a r t e r s w e r e a highly  I n the f a c e of the a p p a r e n t p r o s p e c t  d e m a n d , s e v e r a l of the m a j o r s u p p l i e r s d e c i d e d starter business. prospect  to g e t out o f the l i g h t  S y l v a n i a , o n the o t h e r h a n d , s a w i n t h e s e a c t i o n s a  o f d e c l i n i n g c a p a c i t y w h i c h m o r e t h a n o f f s e t the d e c l i n e i n d e m a n d .  It j u d g e d the d e m a n d to c a p a c i t y r a t i o to be f a v o r a b l e , business,  competitive of d e c l i n i n g  and turned  it into a p r o f i t a b l e i t e m .  (Ansoff,  s t a y e d i n the 1965, p . 189).  ? S e e A l d e r (1967), B e l l (1966), C o x et a l (1964), B u r s k a n d C h a p m a n (1964) to m e n t i o n but a f e w .  46 moves a f i r m may  make.  Included  d i v i s i o n s of m a r k e t i n g s t r a t e g y . the t a c t i c s a f i r m m a y o n e s w i l l be  Because it is impossible  common  to i n c l u d e a l l  e m p l o y u n d e r e a c h s t r a t e g y o n l y a few  important  examined.  S t r a t e g y of i n n o v a t i o n . f i n d new  b e l o w a r e f i v e of the m o s t  D e v e l o p new  w a y s of d i s t r i b u t i n g p r o d u c t s ;  of p r o m o t i n g t h e m .  Innovation  s u c c e s s f u l competitive changing competitive  of a new  products;  d i s c o v e r new  d e v i s e new  and  services;  creative methods  p r o d u c t i s f r e q u e n t l y the  most  t a c t i c b e c a u s e i t o f f e r s the p o t e n t i a l of r a d i c a l l y  r e l a t i o n s h i p s . It c a n do t h i s e i t h e r by c r e a t i n g  new  p r o d u c t c o n c e p t s w h i c h s e t the c o m p a n y a p a r t , o r by c r e a t i n g a new  market  o r m a r k e t i n g c o n c e p t w h i c h has  or  the s a m e e f f e c t .  The  opportunities  i n n o v a t i o n w i t h r e s p e c t to m a r k e t a r e no l e s s t h a n w i t h r e s p e c t to  products.  T h i s c a n be s e e n i n the a u t o m o t i v e i n d u s t r y w h e r e c a r d e a l e r s c r e a t e d i n s t r u m e n t of t i m e p a y m e n t to a l l o w c o n s u m e r s the m o n e y to buy cars.  T h i s m a r k e t i n g t a c t i c i s now  c o n s u m e r good. i n c o m e to m a n y  The  expensive  u n i v e r s a l l y a p p l i e d to a l m o s t e v e r y  In f a c t , c a r r y i n g c h a r g e s a r e now  a n i m p o r t a n t s o u r c e of  retailers.  i n j e c t i o n of n e w l y d i s c o v e r e d  e l e m e n t s into an e x i s t i n g  s i t u a t i o n t r a n s f o r m s the s i t u a t i o n , a n d a new  pattern results.  "Thus  f u n c t i o n of s e l f - s e r v i c e i n a s t o r e , i n c o m b i n a t i o n w i t h an a d j a c e n t l o t , r e s u l t s i n a new ..."  (Barnet,  e m u l a t i o n , and  the  1964,  i n s t i t u t i o n a l f o r m w h i c h we p.  57).  The  new  k n o w as the  ?  the  parking  supermarket  f o r m generates opposition, forces  fosters further innovating.  Department stores  open  s u b u r b a n b r a n c h e s i n c o n j u n c t i o n w i t h s u p e r m a r k e t s thus c r e a t i n g s h o p p i n g  47 centers  to  take  m a r k e t s .  E v e n  of  competition  of  business  continuous  in  a  of  m a y  be  strategies  in a  of  catalogue  but  stamps  not  also  must  to  new  the  quo,  status  only  s u p e r -  enter  this  type  for  loss  compensate  brings  encourages  products,  m e a n s ,  the  of  analysis,  on  how  P r o v i d e  available.  This  to  cans  city.  arrange  In fact,  kind  was  discussing  m o r e  one  that  lowering  of  is  about  and  applications,  and  as  the  even  and  such  convenience  strategy  on  store  of the  of  can  compels  new  causes  S e a r s - R o e b u c k  and  cover  shelves  earliest  the  the  be  often  the  the  to  and  methods.  a  a  speed  very  change  with  wide  placing  most  who  price  or  c o n s u m e r .  with  cut  less  is  a  which  range  local  successful  initiated  national  price  really  it  must  realized  money.  is,  be  B y  m i n i m i z i n g  in effect,  a c c o m p l i s h e d  search  separately  purchase  is  fully  entrepreneur  service  efficiency  m o r e  equated  discussed  listed  of  strategy  time,  Because  will  strategy  behalf  this  convenient  strategy  the  time  purchasing  product.  i . e .  marketing  method  efficiency.  w o r l d ,  c o n s u m e r ' s  costs  trading  stores  i n the  purchasing.  in today's  of  of  this  Before  price  new  threatens  made  f r o m  dealership  the  g r o c e r y  competition  r e s o u r c e s ,  for  shoppers  environment.  tactics  that  offer  of  centers.  innovistic  which  Strategy  goods  shopping  r e s e a r c h  populations  competing  response  of k n o w n  force  the  the  of h i g h  s m a l l e r  in  short,  reallocation  is  the  and  to  In  It  advantage  f r o m  of the  one  time,  the  by  this  m o r e  product.  In  of m i n i m i z a t i o n  cutting  indirect  f o r m  of  direct  the  of  last  total  the  48 K e l l e y (1958) s t a t e s that c o n s u m e r s m u s t a c h i e v e a n a c c e p t a b l e balance between "commodity c o s t " and "convenience cost. "  Commodity  c o s t s a r e the s u m s of m o n e y p a i d t o the r e t a i l e r i n e x c h a n g e f o r the g o o d . Convenience  c o s t s a r e the s u m s of m o n e y p a i d out f o r e x p e n s e s  that a r e  i n c i d e n t t o the p u r c h a s e ( e . g . g a s o l i n e , p a r k i n g , p o s t a g e , d e l i v e r y  charge,  f i n a n c i n g c h a r g e , bus f a r e , e t c . ), p l u s the e x p e n d i t u r e o f t i m e a n d p h y s i c a l and nervous  e n e r g y that m u s t be m a d e to p u r c h a s e the g o o d .  T o m a x i m i z e efficiency, buyers must organize their  purchases  i n t o c l u s t e r s t h r o u g h the d e v i c e o f m u l t i - p u r p o s e s h o p p i n g t r i p s that r e d u c e the  time and effort required for individual transactions.  They concentrate  t h e i r p u r c h a s i n g g e o g r a p h i c a l l y b y g o i n g to s t o r e s a n d s h o p p i n g c e n t e r s w h e r e they c a n f i n d a wide v a r i e t y of goods a n d s e r v i c e s w i t h i n a s m a l l area.  "Convenience  i s one o f the s e r v i c e s s o m e t y p e s of r e t a i l s t o r e s  p r o v i d e f o r their c u s t o m e r s " (Cox,  Cox  1959, p . 360).  i s s a y i n g that c o n s u m e r s m a y , i n f a c t , be w i l l i n g to p a y  money i n exchange f o r "convenience. "  T h i s i s w i t n e s s e d e v e r y day when  we s e e p e o p l e p u r c h a s e c i g a r e t t e s f r o m a d i s p e n s i n g m a c h i n e w h e n t h e y c o u l d e a s i l y buy t h e m f o r 4 cents l e s s i n a r e t a i l s t o r e .  P e o p l e put a r e a l  p r i c e o n the s e r v i c e a n d c o n v e n i e n c e that t h e y r e c e i v e .  The  i m p a c t o f t h i s to m a r k e t i n g s t r a t e g y o c c u r s w h e n a f i r m  d e c i d e s that i t w i l l o f f e r a d d e d c o n v e n i e n c e o r s e r v i c e , a n d y e t s e l l the p r o d u c t f o r the s a m e p r i c e as a c o m p e t i t o r .  8  A  l  s  o  s  e  The consumer realizes a  e  K e l l e y (1955) on " R e t a i l S t r u c t u r e o f U r b a n  Economy."  49 real saving.  F i r m s a l s o compete by offering different types a n d different  d e g r e e s of s e r v i c e .  T h i s is then a case of p r o d u c t d i f f e r e n t i a t i o n , a n d  the e f f e c t of s e r v i c e a n d c o n v e n i e n c e on the p r i c e c a n n o t be m e a s u r e d .  C o n n e c t e d to t h i s c o n c e p t o f m a r k e t i n g e f f i c i e n c y ( i . e .  minimiza-  t i o n of c o n s u m e r s r e a l a n d p e r s o n a l c o s t s ) i s the p r a c t i c e o f p r o v i d i n g i n t e r n a l l i n k a g e s a n d c o m p l i m e n t a r i t y f o r the s h o p p e r . of i n t e r n a l l i n k a g e i s , of c o u r s e , t h e d e p a r t m e n t  T h e best example  s t o r e w h e r e a w o m a n who  w i s h e s to b u y a c l o t h i n g outfit c a n f i n d , b e s i d e s h e r b a s i c a t t i r e , a l a r g e s a m p l e of p u r s e s , shoes, hats, g l o v e s , etc. which she d e e m s as n e c e s s a r y a d d i t i o n s to the o r i g i n a l p u r c h a s e .  A l l these connected goods a r e found  w i t h i n e a s y a c c e s s u n d e r one r o o f o r p e r h a p s minimize h e r search time.  o n one f l o o r , s o a s t o  C o m p l i m e n t a r i t y is best demonstrated  b y the  planned shopping c e n t e r which contains a l a r g e n u m b e r of s m a l l shops  each  c a r r y i n g o n l y a few p r o d u c t s but w h i c h a r e h i g h l y a c c e s s i b l e t o one a n o t h e r . In t h i s c a s e a w o m a n s h o p p e r m a y h a v e t o g o to two o r t h r e e s h o p s t o f i l l her wardrobe  requirements.  A l t h o u g h C o x m a y be c o r r e c t a b o u t " c o n v e n i e n c e " t o a c e r t a i n d e g r e e , he i s m i s t a k e n w h e n he s a y s that the c o n s u m e r " e n d e a v o r s t o m a x i m i z e the r e t u r n he r e c e i v e s i n a l l f o r m s " (1959, p . 3 6 l ) .  Martineau  (1958a) p o i n t s out that t h e r e i s " C l e a r l y . . . a f o r c e o p e r a t i v e i n the d e t e r m i n a t i o n o f the s t o r e ' s c u s t o m e r  body b e s i d e s the obvious  f a c t o r s of l o c a t i o n , p r i c e r a n g e s , a n d m e r c h a n d i s e  functional  o f f e r i n g s " (p. 47).  c a l l s t h i s o t h e r f o r c e " s t o r e p e r s o n a l i t y " but w h a t he i s r e a l l y t a l k i n g is m a r k e t segmentation.  He about  T h i s topic is d i s c u s s e d i n a following s e c t i o n and  50 i s o n l y b r o u g h t up h e r e to c a u t i o n the r e a d e r that the s t r a t e g y of c o n v e n i e n c e i s m o r e c o m p l e x t h a n m i g h t be i m a g i n e d .  A l t h o u g h i t s l o c a t i o n , q u a l i t y of  g o o d s , a n d p r i c e of g o o d s a r e c o m p a r a b l e  f a v o r a b l y , people with a $100,000  h o m e don't u s u a l l y buy h o u s e h o l d g o o d s f r o m the S a l v a t i o n A r m y  Thrift  Store.  It i s i n t e r e s t i n g to note that b u s i n e s s f i r m s do not a l w a y s l o c a t i o n f o r a s t o r e that w i l l m a x i m i z e that s t o r e ' s c u s t o m e r  choose  a  potential.  A l d e r s o n a n d S h a p i r o (1964) c i t e the c a s e w h e r e a f i r m m u s t c h o o s e " o p t i m a l s i t e l o c a t i o n a n d o p t i m a l n e t w o r k e x p a n s i o n " (p. 196).  between  Optimal  e x p a n s i o n o f a n e t w o r k f a v o r s the m o s t e f f i c i e n t u s e o f o t h e r m a r k e t i n g t a c t i c s s u c h a s a d v e r t i s i n g a n d c r e d i t c a r d s but b u s i n e s s p o t e n t i a l at an i n d i v i d u a l site may representation.  h a v e to be s a c r i f i c e d i n o r d e r t o a c h i e v e p r o p e r m a r k e t  M o s t l a r g e c o r p o r a t i o n s a r e f a c e d by the p r o b l e m  e v a l u a t i o n of s t r a t e g y .  O p t i n g f o r the b e s t s i t e w i l l p r o v i d e  s h o r t - r u n c o n v e n i e n c e to a l o c a l c u s t o m e r ,  in their  immediate  w h i l e the n e t w o r k s t r a t e g y i s  a l o n g - r u n m o v e a i m e d at a m u c h b r o a d e r m a r k e t .  F o r l a r g e national and  i n t e r n a t i o n a l f i r m s , l i k e S h e l l , the n e t w o r k o p t i o n h a s w o r k e d w e l l .  A n o t h e r e f f i c i e n c y s t r a t e g y i s the l o c a t i o n of o n e - s t o p o u t l e t s i n p o s i t i o n s that m i n i m i z e the c o n s u m e r ' s ' c o s t s .  1  shopping  In low o r d e r  a u t o m o b i l e s h o p p i n g i t h a s b e e n o b s e r v e d that the m o s t s u c c e s s f u l  retail  s i t e s a r e t h o s e that m i n i m i z e the m o t o r i s t ' s t i m e a n d m a x i m i z e h i s c o n v e n i e n c e ( C l a u s & R o t h w e l l , 1970).  M o s t often these outlets c a r r y p r o d u c t s  that h a v e a low c r o s s e l a s t i c i t y of d e m a n d . may  Although individual products  be h i g h e r p r i c e d t h a n i n s h o p p i n g c e n t e r s the a d d e d c o n v e n i e n c e of  l o c a t i o n m o r e t h a n m a k e s up f o r t h i s p r i c e  differential.  51  These automobile-oriented  s t o r e s are n o r m a l l y l o c a t e d on m a j o r t r a f f i c  a r t e r i e s and a r e i d e n t i f i e d i n the l i t e r a t u r e as " r i b b o n d e v e l o p m e n t s " ( B e r r y , 1959).  B e f o r e l e a v i n g this s e c t i o n on s t r a t e g y a b r i e f w o r d m u s t be s a i d about c r e d i t c a r d s .  The  influence of this i n n o v a t i o n i s only being  recognized  today and i t s f u l l s i g n i f i c a n c e i s f a r f r o m r e a l i z e d . The a p p e a l of the c r e d i t c a r d m u s t come under the s t r a t e g y of convenience. c a r d may  A l t h o u g h the c r e d i t  e v e n t u a l l y cost i t s h o l d e r m o r e ( i n t e r e s t on back p a y m e n t s , etc.)  than paying i n s t r a i g h t c a s h , i t s benefit i s d e r i v e d f r o m i t s ease of use  and  the convenience i t a f f o r d s the u s e r i n not having to c a r r y m o n e y o r b a l a n c i n g in-the -pocket funds.  Strategy of p r i c e . P r o v i d e c o m p a r a b l e or substitute goods at a l o w e r p r i c e than c o m p e t i t i o n .  P r i c e s t r a t e g y being the m o s t c o m m o n and  u s u a l l y the m o s t e f f e c t i v e method of c o m p e t i t i o n i s w e l l developed i n the l i t e r a t u r e (see B u r s k &: C h a p m a n , 1964; E n i s & Cox,  1969; Cox et a l ,  1964). A l m o s t e v e r y i s s u e of m a r k e t i n g j o u r n a l s contains at l e a s t one a r t i c l e on how  to a r r i v e at a p r i c i n g s t r a t e g y .  The  f i r m w i t h the l o w e s t  p r o d u c t i o n c o s t s , m o r e e f f i c i e n t management, and best c h a n n e l l i n g s y s t e m , can p r o v i d e goods at a l o w e r p r i c e than the c o m p e t i t o r s , and  should  t h e r e f o r e have the l a r g e s t s h a r e of the m a r k e t .  In a c t u a l f a c t , h o w e v e r , the u s u a l m a r k e t s i t u a t i o n i s one of p r i c e l e a d e r s h i p , where the l a r g e m a j o r i t y of p r o d u c e r s or s e l l e r s m a r k e t the s a m e good at i d e n t i c a l p r i c e s . C a s s a d y (1954) d i s t i n g u i s h e s three types of p r i c e l e a d e r s h i p ;  52 1.  B a r o m e t r i c - f i r m price leadership, where adherence  n o n l e a d e r s r e s t s on s k i l l e d a n d t i m e l y a d j u s t m e n t s to m a r k e t c o n d i t i o n s by s o m e one 2.  Dominant-firm  by  of p r i c e s  competitor.  leadership, where s m a l l competitors  e x i s t on s u f f e r e n c e a n d f u l l y r e a l i z e t h e i r v u l n e r a b i l i t y to dominant-firm 3.  action, hence  adhere.  P r i c e l e a d e r s h i p i m p l e m e n t e d by g r o u p a c t i o n ,  vendors,  where  d i s s a t i s f i e d w i t h the r e s u l t s of a c o m p e t i t i v e  l e a d e r s h i p s c h e m e , e m p l o y s o m e t y p e of c o l l u s i v e a r r a n g e m e n t to i n s u r e e f f e c t i v e n e s s ,  (pp. 95-99)  C a s s a d y u s e s the p e t r o l e u m i n d u s t r y as a n e x a m p l e of the b a r o m e t r i c t y p e of p r i c e  leadership.  In s o m e i n s t a n c e s the p r i c e of the p r o d u c t , a l t h o u g h i m p o r t a n t to the p r o d u c e r , i s not of m a j o r s i g n i f i c a n c e to the c o n s u m e r o r i n d i v i d u a l seller.  The  c r o s s e l a s t i c i t y of d e m a n d f o r s o m e g o o d s i s s o l o w that a n  individual dealer may  not e v e n c h e c k h i s c o m p e t i t o r ' s p r i c e .  e s p e c i a l l y t r u e f o r s u c h i t e m s as f o o d , b e v e r a g e s , w h e r e a s m a l l d r o p i n p r i c e by one the m a r k e t as a w h o l e .  s e e k to f i n d t h e i r b e s t  tobacco, gasoline, etc.  r e t a i l outlet w i l l not a p p r e c i a b l y a f f e c t  W i t h s u c h i t e m s as f u r n i t u r e , h o u s e s ,  and even clothing c u s t o m e r s  This is  automobiles,  a r e m o r e a w a r e of p r i c e d i f f e r e n t i a l s  and  buy.  In m a n y i n s t a n c e s p r i c e c o m p e t i t i o n i s p r o h i b i t e d by l a w , f o r example, public utilities, trucking, airlines, etc.  One  u n u s u a l c a s e of  p r o h i b i t i o n of p r i c e c o m p e t i t i o n i s r e c o r d e d i n M a s s a c h u s e t t s  i n 1956  where  G e n e r a l E l e c t r i c sought a c o u r t i n j u n c t i o n a g a i n s t i n d i v i d u a l d e a l e r s f o r selling G.E.  p r o d u c t s at a l o w e r p r i c e t h a n s i m i l a r p r o d u c t s of o t h e r  b r a n d s w e r e b e i n g s o l d ( B a r n e t , 1964,  p.  50).  53 Boston.  M a r c h 8.  The  f u l l b e n c h of the  Massachusetts  S u p r e m e J u d i c i a l C o u r t r u l e d that the State f a i r t r a d e is v a l i d . . . .  The  court  law  . . . states G e n e r a l E l e c t r i c is  e n t i t l e d to a n i n j u n c t i o n r e s t r a i n i n g the d e f e n d e n t f r o m s e l l i n g the p l a i n t i f f ' s s m a l l a p p l i a n c e s at l o w e r p r i c e s t h o s e now,  or h e r e a f t e r ,  than  p e r m i t t e d in its fair trade a g r e e -  ment with other r e t a i l e r s .  ( R e t a i l i n g D a i l y , M a r c h 9,  1956)  P r i c e c o m p e t i t i o n though effective is u s e d only i n s p e c i f i c circumstances.  S t r a t e g y of c o m p e t i t i v e d i f f e r e n c e .  P r o v i d e unusual or distinctive  g o o d s , o r g o o d s that a p p e a r d i s t i n c t i v e to the  customer.  F r o m a strategy viewpoint, product differentiation is securing  a m e a s u r e of c o n t r o l o v e r the d e m a n d f o r a  p r o d u c t by a d v e r t i s i n g o r p r o m o t i n g d i f f e r e n c e s a p r o d u c t and  between  the p r o d u c t s of c o m p e t i n g s e l l e r s .  It i s  b a s i c a l l y the r e s u l t of s e l l e r s d e s i r e s to e s t a b l i s h f i r m m a r k e t p o s i t i o n s a n d / o r to i n s u l a t e t h e i r b u s i n e s s price competition. i z e d by h e a v y u s e  D i f f e r e n t i a t i o n t e n d s to be of a d v e r t i s i n g a n d  r e s u l t i n p r i c e s that a r e levels associated It m a y 1956,  be p.  character-  p r o m o t i o n and  somewhat above  against to  equilibrium  with p e r f e c t l y competitive  c l a s s i f i e d as p r o m o t i o n a l s t r a t e g y .  conditions. (Smith,  6)  T h i s i s r e a l l y the w o r l d of the M a d i s o n A v e n u e a d v e r t i s i n g who  m a s t e r m i n d the m u l t i m i l l i o n a d v e r t i s i n g c a m p a i g n s f o r s o a p ,  cigarettes, beer,  A  etc.  c o m p a n y that c a n e s t a b l i s h a r e a l c o m p e t i t i v e d i f f e r e n c e  o f t e n c o r n e r a s e g m e n t of the m a r k e t . was  firms  a b l e to s u r v i v e  G e n e r a l M o t o r s and  and  For  example, A m e r i c a n  Motors  p r o s p e r by d i f f e r e n t i a t i n g i t s p r o d u c t f r o m that of  Ford^  and  cultivating a consumer subgroup, whereas  S t u d e b a k e r - P a c k a r d p e r s i s t e d i n t r y i n g to c o m p e t e d i r e c t l y w i t h the firms  and  failed.  may  large  54 In t o d a y ' s c o n s u m e r m a r k e t , c o m p e t i t i v e d i f f e r e n c e o c c u r s i n almost every retail product.  It h a s  b e e n the o l i g o p o l i s t ' s a l t e r n a t i v e to  price competition.  S t r a t e g y of m a r k e t s e g m e n t a t i o n . particular socio-economic Market segmentation  D i r e c t i n g a p r o d u c t at a  group. . . . c o n s i s t s of v i e w i n g a  heterogeneous  m a r k e t as a n u m b e r of s m a l l e r h o m o g e n e o u s m a r k e t s i n r e s p o n s e to d i f f e r i n g p r o d u c t p r e f e r e n c e s a m o n g • market segments.  important  It i s a t t r i b u t a b l e to the d e s i r e s o f c o n s u m e r s  o r u s e r s f o r m o r e p r e c i s e s a t i s f a c t i o n of t h e i r v a r y i n g w a n t s . Like differentiation, segmentation of a d v e r t i s i n g a n d p r o m o t i o n .  often i n v o l v e s substantial use  T h i s i s to i n f o r m m a r k e t  of the a v a i l a b i l i t y of g o o d s o r s e r v i c e s p r o d u c e d as m e e t i n g  their needs with p r e c i s i o n .  segments  for or presented  U n d e r these  circumstances,  p r i c e s t e n d to be s o m e w h a t c l o s e r t o p e r f e c t l y c o m p e t i t i v e equilibrium. strategy.  M a r k e t segmentation  (Smith,  1956,  p.  T h i s f a c e t of m a r k e t i n g many modern firms.  is essentially a  merchandising  6)  s t r a t e g y i s r e s p o n s i b l e f o r the s u c c e s s o f  M y e r s a n d N i c o s i a (1968) note t h a t ,  "Marketing  m a n a g e m e n t p o l i c i e s , s t r a t e g i e s and t a c t i c s depend p r o g r e s s i v e l y  on  i d e n t i f i c a t i o n of u s e f u l m a r k e t s e g m e n t s , p a r t i c u l a r l y i n a s o c i e t y b e c o m i n g m o r e a f f l u e n t " (p. 182).  In r e c e n t y e a r s the c o n c e p t of m a r k e t  t i o n h a s r e s u l t e d i n a p r o l i f e r a t i o n of s i m i l a r p r o d u c t s . f i e l d , f o r i n s t a n c e , c o n s i d e r what m a n u f a c t u r e r s preparations have achieved. cold c r e a m .  Now  In the  segmentacosmetics  of m a k e - u p a n d s k i n - c a r e  O n c e u p o n a t i m e t h e r e was  a product  called  c o l d c r e a m , although i t s t i l l e x i s t s , has been "spun o f f "  into foundation, c l e a n s i n g , v a n i s h i n g , n o u r i s h i n g , conditioning, a s t r i n g e n t , l a n o l i n , m a r r o w , and w r i n k l e c r e a m . o c c u r r e d w i t h a m u l t i t u d e of o t h e r p r o d u c t s a n d  hormone,  S i m i l a r situations have  services.  55 An  i n t e r e s t i n g e x a m p l e of m a r k e t s e g m e n t a t i o n i s the c a s e of  Control Data. and  IBM,  the m o s t d o m i n a n t c o m p a n y i n the f i e l d , h a d  s k i l f u l s a l e s f o r c e and  of s u p p o r t i n g  these,  Data recognized t h e i r own  competitive  segment, I B M  p r o v i d i n g t h e i r own  c a p a b l e of  services.  A  Control  developing  g o o d m a c h i n e at a  O n c e C o n t r o l D a t a l a u n c h e d i t s a t t a c k on the  market  c o u l d not c o u n t e r i t s p r i c e r e q u i r e m e n t s b e c a u s e of i t s across  a broad product range.  e x p a n d e d b e y o n d i t s o r i g i n a l m a r k e t s e g m e n t and 1969,  p.  own  Control Data  t h e r e f o r e a b l e to g r o w r a p i d l y , s o r a p i d l y , i n f a c t , t h a t i s h a s  (Tilles,  cost  t h e r e f o r e p o s s i b l e as a c o m m e r c i a l s u c c e s s f o r a  requirements for consistency was  The  b u i l t i n t o the c o m p u t e r s p r i c e .  that u s e r s of l a r g e c o m p u t e r s a r e  p r i c e was  s m a l l company.  a b r o a d r a n g e of c u s t o m e r s e r v i c e s .  h o w e v e r , was  s o f t w a r e and  a large  now  must r e v i s e its strategy  188).  M a r k e t s e g m e n t a t i o n a l s o o c c u r s i n the u r b a n r e t a i l s t r u c t u r e . M a r t i n e a u (1958a) p o i n t s out that " r e g a r d l e s s  of the a b i l i t y to p a y , a l l  shoppers seek stores whose total image is acceptable i n d i v i d u a l l y " (p. 49).  He  and  appealing  to t h e m  g o e s on to p o i n t out that the s h o p p i n g s i t u a t i o n  i n c l u d e s m a n y t h i n g s not d i r e c t l y a s s o c i a t e d w i t h s p e c i f i c i t e m s but c l o s e l y c o n n e c t e d to v a r i o u s p a t t e r n s the s t o r e s i n t o h e r p l a n n i n g ,  of c o n s u m e r b e h a v i o r . she  w h a t she  b u y s d e p e n d s on the  a t t r i b u t e s t h a t a r e a p a r t of the s t o r e ' s i m a g e : -  and  other  the s h o p p e r f i t s  manipulates store images in her  In a l a r g e p a r t , w h e r e s h e g o e s a n d  personnel,  "As  c u s t o m e r s " (p. 55).  atmosphere,  In a n o t h e r a r t i c l e on  S p e n d i n g B e h a v i o r " M a r t i n e a u (1958b) c l a i m s  m i n d o  subjective  status,  "Social Classes  that e n t r e p r e n e u r s  d e s i g n t h e i r r e t a i l s i t e s to f i t the d e m a n d s of a s e l e c t e d m a r k e t  must  segment.  56 As  y e t , l i t t l e w o r k has  b e e n done t o w a r d  r e t a i l site s e l e c t i o n and  on the b a s i s of m a r k e t s e g m e n t a t i o n a l t h o u g h  design  it is obvious that f i r m s  i n t u i t i v e l y p r a c t i c e this s t r a t e g y .  F i r m s a l s o use  linkage and  complementarity in conjunction  m a r k e t s e g m e n t a t i o n to p r o m o t e s a l e s .  A  large expensive downtown hotel,  f o r example, w i l l have high p r i c e d j e w e l r y , f u r , and o r i n c l o s e p r o x i m i t y to the e s t a b l i s h m e n t ,  clothing shops within  while less expensive hotels are  not l i k e l y to t a k e a d v a n t a g e of t h i s s i t u a t i o n . of a c e r t a i n s o c i a l s e g m e n t to one  with  Where there is an  p l a c e o r one  attraction  a r e a , f i r m s c a t e r i n g to the  d e m a n d s of that c l a s s w i l l l i k e l y e s t a b l i s h c o m p l e m e n t a r y b u s i n e s s e s  near  by.  people,  T h e r e i s a l s o w h a t m i g h t be c a l l e d " c r o s s t o w n l i n k a g e , " w h e r e  no m a t t e r w h e r e t h e y m a y establishment  be i n the c i t y , w i l l s e e k to f i n d the t y p e  that a g r e e s w i t h t h e i r s o c i a l i m a g e .  In a s t r a n g e  of  environ-  m e n t , the r e p u t a t i o n of the s t o r e ' s n a m e o r , t h e b r a n d of the g o o d s i t s e l l s a r e o f t e n u s e d as c r i t e r i a f o r c h o o s i n g  the o u t l e t .  a f a v o r a b l e i m a g e w i t h a c h a i n of s t o r e s m a y  A  f i r m that can  be a b l e to o b t a i n a c e r t a i n  a m o u n t of c u s t o m e r l o y a l t y w i t h i n a s e g m e n t of the p o p u l a t i o n . s e r v i c e s t a t i o n s , f o r i n s t a n c e , D u p o n t (1954) has of a l l c u s t o m e r s a r e l o y a l to one  Summary.  The  create  estimated  In g a s o l i n e  t h a t 20 p e r  cent  b r a n d of g a s o l i n e .  a b o v e d i s c u s s i o n on m a r k e t i n g s t r a t e g i e s i s not  i n t e n d e d to c o v e r the f i e l d ; but s i m p l y to d e m o n s t r a t e the s u b t l e t i e s of a highly complex topic.  It m u s t be r e a l i z e d that a f i r m m a y  employ  n u m b e r of t h e s e s t r a t e g i e s i n v a r y i n g d e g r e e s to a m u l t i t u d e To  p r e d i c t the s u c c e s s  of a n y  c o m b i n a t i o n of t a c t i c s h a s  of  any  products.  l a r g e l y been a  57 matter  of b u s i n e s s e x p e r i e n c e and l u c k .  marketing  T h e adoption of a s p e c i f i c  s t r a t e g y i s to a l a r g e d e g r e e a r e f l e c t i o n o f how t h e f i r m  p e r c e i v e s its e n v i r o n m e n t .  L i k e w i s e , the a c t i o n s of the f i r m a r e m i r r o r e d  i n the e n v i r o n m e n t , both p h y s i c a l l y a n d c u l t u r a l l y .  N a t u r e of M a r k e t i n g S t r a t e g y f o r ' O i l C o m p a n i e s • two  Marketing  forms  s t r a t e g y i n the g a s o l i n e r e t a i l i n d u s t r y g e n e r a l l y t a k e s  -- p r i c e c o m p e t i t i o n a n d n o n - p r i c e c o m p e t i t i o n . ^ I n f a c t , t h i s  split in marketing  s t r a t e g y i s s o b a s i c that m o s t e x p e r t s do n o t r e g a r d  these two s t r a t e g i e s as m u t u a l l y c o m p e t i t i v e * ^ (except i n i n s t a n c e s of unilateral price wars).  P r i c e competitive s e r v i c e stations  compete  d i r e c t l y with other p r i c e competitors while n o n - p r i c e stations a r e conc e r n e d only with stations w h i c h u s e n o n - p r i c e t a c t i c s to s e c u r e a p o r t i o n of the m a r k e t .  A l t h o u g h t h e s e t w o g r o u p s do h a v e a n i n f l u e n c e o n one a n o t h e r ,  t h e y a r e p r i m a r i l y p r e o c c u p i e d w i t h t h e i r o w n s e g m e n t o f the m a r k e t a n d engage i n d i r e c t c o m p e t i t i o n only r a r e l y . ^  Under n o r m a l conditions f i r m s  in both g r o u p s u s e a n u m b e r of s u b - s t r a t e g i e s a n d t a c t i c s (product d i f f e r e n t i a t i o n b e i n g the m o s t c o m m o n ) t o c o m p e t e a g a i n s t t h e i r p e e r s .  9  (Bain,  1944; B u c k , I960; C a s s a d y & J o n e s ,  1964;  C l a u s , 1969; C l a u s  1967;  Stanford Research  h Rothwell,  1970;  Fleming,  1951;  1954, 1966;  I n s t i t u t e , 1964; W a r r e n & W o n g ,  l^See especially C a s s a d y & Jones,  Cassady,  1951; C a s s a d y ,  Morrow,  1961). 1964; M o r r o w ,  1967. l^Such rare occasions are called price wars. f i r m s u s e the s a m e s t r a t e g y -- p r i c e  competition.  In t h i s c a s e , a l l  58 T o understand understanding 1.  the n a t u r e o f c o m p e t i t i o n one m u s t h a v e  some  o f the m a r k e t d e m a n d f o r g a s o l i n e :  G a s o l i n e h a s o n l y one m a i n u s e , t h e r e f o r e c o n s u m e r s  cannot  put the p r o d u c t to o t h e r u s e s w h e n i t s p r i c e i s l o w , a n d thereby expand 2.  consumption.  T h e r e a r e no p r a c t i c a l substitutes f o r g a s o l i n e as a m o t o r fuel  thus c o n s u m e r s c a n n o t s h i f t to o t h e r p r o d u c t s  when  the p r i c e i n c r e a s e s . 3.  Gasoline is a product whose demand is d e r i v e d ,  thus  c u s t o m e r s a r e n o t l i k e l y to u s e m o r e m e r e l y b e c a u s e t h e p r i c e i s low. 4.  G a s o l i n e i s j o i n t l y d e m a n d e d w i t h o t h e r p r o d u c t s , s o that its p u r c h a s e accounts  f o r o n l y p a r t o f the t r a n s p o r t a t i o n  e x p e n s e s ; thus a l o w e r p r i c e i s n o t l i k e l y to i n d u c e greater consumption (Cassady  & Jones,  1951, p p . 2 0 - 2 1 ) .  T h e s e c h a r a c t e r i s t i c s a r e c o n s i s t e n t w i t h the f i n d i n g s that the d e m a n d f o r g a s o l i n e i s v e r y i n e l a s t i c ; " a 10 p e r c e n t c h a n g e i n the a v e r a g e r e t a i l p r i c e w o u l d r e s u l t i n s o m e t h i n g l i k e a 1. 3 p e r c e n t c h a n g e i n the q u a n t i t y t a k e n b y c o n s u m e r s " ( C a s s a d y Cross  & Jones,  1951, p. 2 1 ) .  e l a s t i c i t y of d e m a n d h o w e v e r i s a d i f f e r e n t s t o r y .  U p to a c e r t a i n  point, a d i f f e r e n t i a l p r i c e i n g a s o l i n e e x h i b i t s a low c r o s s e l a s t i c i t y of demand.  Normally,  only a s m a l l percentage  bargain prices i n gasoline*  ^ D e r i v e d demand:  1  the d e m a n d f o r a n o t h e r  3  of c o n s u m e r s look f o r  a n d a p r i c e d i f f e r e n t i a l o f 2£ w i l l go  the d e m a n d f o r one p r o d u c t i s c r e a t e d b y  related product.  F o r e x a m p l e , the d e m a n d f o r  t y p e w r i t e r r i b b o n i s c r e a t e d by people who u s e t y p e w r i t e r s . 1 I t h a s b e e n e s t i m a t e d that o n l y 2 p e r c e n t o f m o t o r i s t s a r e 3  bargain hunters  ( B u s i n e s s W e e k , M a r c h 21, 1953), but t h i s w i l l v a r y  f r o m m a r k e t to m a r k e t a n d m a y be a s h i g h a s 10 - 12 p e r c e n t .  59 u n n o t i c e d b y the g e n e r a l p u b l i c .  In the e v e n t o f a g r e a t e r d i f f e r e n t i a l , the  d e m a n d c u r v e b e c o m e s " k i n k e d " a n d the c r o s s e l a s t i c i t y of d e m a n d sharply.  rises  In s u c h c a s e s b r a n d l o y a l t y i s a b a n d o n e d a n d m o t o r i s t s s e e k  s t a t i o n s o f f e r i n g l o w e r p r i c e s ( W a r r e n & W o n g , 1961, p. 9 ) .  In e c o n o m i c t e r m s ( m e a n i n g p r i c e c o m p e t i t i v e ) the g a s o l i n e m a r k e t i s r e g a r d e d as a f o r m  of ' i m p e r f e c t c o m p e t i t i o n . ' T h i s i s b e c a u s e  t h e r e a r e r e l a t i v e l y few s e l l e r s a n d a l a r g e n u m b e r o f b u y e r s . o l i g o p o l i s t s i n the m a r k e t a r e c a l l e d " m a j o r s " ^ s i d e r a b l e i n f l u e n c e o n the m a r k e t a s a w h o l e .  The  a n d e a c h one h a s a c o n -  The majors  are usually well  i n f o r m e d a b o u t m a r k e t c o n d i t i o n s w h i l e the c o n s u m e r s a r e at a d i s a d v a n t a g e because  of t h e i r g e n e r a l l a c k of k n o w l e d g e .  Gasoline is basically a homo-  geneous p r o d u c t o f f e r i n g no a p p r e c i a b l e d i f f e r e n c e i n q u a l i t y (although the majors  p r o m o t e the i d e a o f p r o d u c t d i f f e r e n t i a t i o n ) .  B e c a u s e o f the n a t u r e  of the i n d u s t r y , c o n s i d e r a b l e c a p i t a l i s n e e d e d to e s t a b l i s h a n i n t e g r a t e d f i r m i n the m a r k e t .  T h i s t e n d s t o l i m i t the n u m b e r o f new e n t r i e s a s w e l l  as r e s t r i c t i n g the o p e r a t i n g f i r m s f r o m advantage  of changing m a r k e t  s h i f t i n g i n v e s t m e n t s to take  conditions.  In r e s p o n s e t o the a b o v e s i t u a t i o n a p r a c t i c e o f p r i c e has e v o l v e d .  leadership  "The l a r g e o i l c o m p a n i e s , such as E s s o , Standard, and  S t a n d a r d O i l C o m p a n y of I n d i a n a , a t t e m p t t o s e t p r i c e to o b t a i n a t a r g e t r e t u r n on i n v e s t m e n t " ( M c C a r t h y ,  I 9 6 0 , p. 633). W h e t h e r the 'target  r e t u r n on i n v e s t m e n t ' m e t h o d i s u s e d o r not, g o v e r n m e n t s have i n v e s t i g a t e d  l ^ A m a j o r c o m p a n y has a c o m p l e t e l y integrated i n d u s t r i a l s t r u c t u r e a n d s e l l s at l e a s t 2 p e r c e n t o f the t o t a l N o r t h A m e r i c a n  market.  60 the o i l c o m p a n i e s m a n y t i m e s a n d price leadership,  a r e w e l l a w a r e of the p r a c t i c e of  but h a v e done l i t t l e to d i s c o u r a g e i t ( M o r r o w ,  1967).  In s u m m a r y , t h e r e f o r e , the s o - c a l l e d p r i c e l e a d e r s h i p i n the p e t r o l e u m i n d u s t r y b o i l s d o w n to the f a c t that s o m e  company  i n e a c h t e r r i t o r y m o s t of the t i m e b e a r s the onus of f o r m a l l y recognizing  current conditions  . . . .  In s h o r t , u n l e s s  so-called price leader accurately interprets basic and  the  conditions  l o c a l c o n d i t i o n s , i t s o o n w i l l not be the l e a d i n g  marketer.  P r i c e l e a d e r s h i p d o e s not m e a n that the p r i c e l e a d e r c a n p r i c e s to get the m a x i m u m p r o f i t a n d to c o n f o r m .  The  ( D e a n , 1951,  p.  f o r c e other  set  marketers  432)  petroleum industry in N o r t h A m e r i c a is a very  complex  p h e n o m e n a w h i c h r u n s the f u l l g a m u t of r e t a i l - i n d u s t r i a l f u n c t i o n s . actors single handedly control extraction, manufacturing, and  r e t a i l i n g of p e t r o l e u m p r o d u c t s ,  while other a c t o r s may  independent b u s i n e s s m e n p e r f o r m i n g any b r i n g i n g o i l p r o d u c t s to the p u b l i c . ;  is a l s o c o m p l e x and  The  one  Some  distribution, act as  of a n u m b e r of s t e p s i n  retail aspect  of the i n d u s t r y i t s e l f  i n v o l v e s m a n y d i v e r s e m e t h o d s of m a r k e t i n g  and  marketing strategies.  B e s i d e s the 25 m a j o r c o m p a n i e s i n N o r t h A m e r i c a t h e r e a r e several subsiduary  c o m p a n i e s as w e l l as a n u m b e r of i n d e p e n d e n t s .  companies often use n a m e s of s t a t i o n s a n d  subsiduaries  as a f r o n t f o r p r i c e c u t t i n g .  p r o d u c t s a r e d i f f e r e n t , the c o m p a n y c a n  w i t h o u t d a m a g i n g the p a r e n t c o m p a n y ' s i m a g e . r e q u i r e m a j o r capital outlays nor enterprise.  also Major  Because  the  cut p r i c e s  S u b s i d u a r y f i r m s do  not  do t h e y tax the m a n a g e m e n t of the p a r e n t  Independent stations s e l l r e l a t i v e l y unknown brands (except)  l o c a l l y ) , s o m e t i m e s no b r a n d i s g i v e n , private brand.  or it may  be the s e r v i c e s t a t i o n ' s  T h e y u t i l i z e the h i g h c r o s s e l a s t i c i t y of d e m a n d f o r g a s o l i n e  61 by c u t t i n g p r i c e s .  D i r e c t n e s s o f c o m p e t i t i o n i n r e t a i l i n g i s i n f l u e n c e d b y two independent v a r i a b l e s : spatial p r o x i m i t y and s i m i l a r i t y o r d i s s i m i l a r i t y of p r o d u c t .  " B e c a u s e of d i f f e r i n g s e r v i c e r e q u i r e m e n t s ,  of the s p a t i a l e l e m e n t , a n d p r o d u c t p r e f e r e n c e s , a few s t a t i o n s a s c o m p l e t e l y  the i m p o r t a n c e  consumers consider  only  s a t i s f a c t o r y s u b s t i t u t e s f o r one a n o t h e r "  ( C a s s a d y & J o n e s , 1951, p. 9 0 ) . ^  T h i s m e a n s that o n l y a v e r y  small  n u m b e r of s t a t i o n s a r e i n d i r e c t c o m p e t i t i o n .  The competition  of s t a t i o n s  w h i c h a r e d i s s i m i l a r i n the q u a l i t y o f p r o d u c t ,  the type o f s e r v i c e o f f e r e d ,  o r the s p a t i a l s e p a r a t i o n a r e i n s e m i d i r e c t o r i n d i r e c t c o m p e t i t i o n  --  s e l l i n g a l i t t l e k n o w n b r a n d o f g a s o l i n e , p r o v i d i n g a l o w e r q u a l i t y of s e r v i c e , being situated i n a m o r e i n a c c e s s i b l e p l a c e .  P r i c e - c u t t e r s t a t i o n s o f f e r i n g a d i f f e r e n t type o f " p r o d u c t - s e r v i c e " but l o c a t e d i n c l o s e p r o x i m i t y t o t h o s e w i t h w h o m t h e y i n d i r e c t l y c o m p e t e , tend i n c r e a s i n g toward'  g a i n i n g p a t r o n a g e at the e x p e n s e o f s u c h i n d i r e c t  r i v a l s as p r i c e d i f f e r e n t i a l s w i d e n .  H o w e v e r the e f f e c t o f i n d i r e c t  rivalry  t a k e s p l a c e o v e r a l o n g t i m e a n d i s n o t a s g r e a t a s i n the c a s e o f d i r e c t r i v a l r y ( C a s s a d y & J o n e s , 1951).  Direct rivals, including price-cutters  as w e l l a s n o n - p r i c e  m a y a t t e m p t t o a t t r a c t c u s t o m e r s by  competitors,  differentiating their products  i n the m i n d o f the b u y e r ( a d v e r t i s i n g a n d  p r o m o t i o n ) , by p r o v i d i n g s u p e r i o r p r o d u c t - s e r v i c e (convenience,  l ^ O n e c a n n o t do a c o m p l e t e s t u d y of g a s o l i n e r e t a i l i n g f r e q u e n t r e f e r e n c e to C a s s a d y a n d J o n e s .  personal  without  62  s e r v i c e , c r e d i t c a r d s ) , by m a k i n g c o n c e s s i o n s f r o m the m a r k e t p r i c e ( c o u p o n s , b o n u s e s , g i v e - a w a y s , p r i z e s ) , o r by a n y  Non-price strategy.  c o m b i n a t i o n of  In t h i s f o r m of i n t r a - g r o u p  m a t t e r of b r a n d b e c o m e s c r i t i c a l .  rivalry,  these.  the  M o s t m a j o r s e s t a b l i s h a n i m a g e on  n a t i o n a l o r r e g i o n a l b a s i s by e x t e n s i v e  a d v e r t i s i n g and p r o m o t i o n .  a  The  c o n c e p t i s the s a m e as i n the c i g a r e t t e i n d u s t r y w h e r e a n a t t e m p t i s m a d e to b u i l d p r o d u c t d i f f e r e n t i a t i o n i n the m i n d of the c o n s u m e r . may  h a v e a l a r g e n u m b e r of b r a n d l o y a l p a t r o n s .  A  intra-group  r i v a l r y i s b a s e d on the s t r e n g t h of the b r a n d s as s u p p o r t e d by  and  brand  I n s o f a r as the p r i c e  differential between brands is v e r y n o m i n a l or nonexistant,  services.  strong  dealer  T h u s a l l d e a l e r s a f f i l i a t e d w i t h the p r o d u c e r a t t e m p t to s u p p o r t  e n h a n c e a s i n g l e b r a n d i m a g e i n o r d e r to t a k e a d v a n t a g e of a b r a n d -  conscious market.  It i s a l s o to the a d v a n t a g e of i n d i v i d u a l d e a l e r s to f o s t e r  s t a t i o n l o y a l t y as w e l l as b r a n d l o y a l t y by o f f e r i n g b e t t e r q u a l i t y s e r v i c e s and  facilities.  It h a s  b e e n f o u n d that the r e v e r s e  effect is also true; brand  l o y a l t y i s e s t a b l i s h e d by a m o t o r i s t b e c a u s e of the a f f i n i t y he m a y a p a r t i c u l a r s t a t i o n (Dupont,  have for  1954).  B e c a u s e t h e i r p o s i t i o n i n the m a r k e t f o r c e s t h e m to e m p h a s i z e other than p r i c e competitive  t a c t i c s , m a j o r company stations have  the q u a l i t y of the p r o d u c t - s e r v i c e competitive  methods.  The  as w e l l as s e m i - p r i c e  m o s t w i d e l y u s e d and  e m p l o y e d by o i l c o m p a n i e s i s the e s t a b l i s h m e n t stations in highly a c c e s s i b l e locations. f u l l r a n g e of f a c i l i t i e s a n d  and  stressed  non-price  most successful tactic of h i g h q u a l i t y s e r v i c e  T h i s i s u s u a l l y a c c o m p a n i e d by a  adequate s e r v i c e s (Claus  & Rothwell,  1970).  63 T h e p e r f o r m a n c e of a n y s i n g l e m a j o r s t a t i o n to a l a r g e e x t e n t depends  on a n u m b e r of c r u c i a l i n t e r n a l s i t e v a r i a b l e s as w e l l as e x t e r n a l  s i t e v a r i a b l e s ( s e e q u a l i t y r a t i n g g u i d e s -- K e l l e y , Brick,  1968; C l a u s ,  1955; C a n o y e r , 1-946;  1969; C l a u s & R o t h w e l l , 1970).  B e c a u s e these f i r m s  do n o t c o m p e t e t h r o u g h p r i c e t h e y m u s t r e l y on d e v e l o p m e n t o f c o n v e n i e n c e and a c c e s s i b i l i t y .  B e s i d e s the b a s i c s u b - s t r a t e g i e s of p r o d u c t d i f f e r e n t i a t i o n a n d e f f i c i e n c y m o s t m a j o r f i r m s e m p l o y a n u m b e r of o t h e r m o v e s to a t t r a c t patronage.  S p e c i a l f e a t u r e p r i c e s on t i r e s , b a t t e r i e s , a n d a c c e s s o r i e s  ( T B A ) i s a competitive weapon.  A l s o , the u s e o f g i v e - a w a y s ,  coupons,  bonuses, p r i z e s , contests, etc. is standard promotional practice. u s e of g i m m i c k s  of t h i s t y p e u s u a l l y t a k e s one of t h r e e f o r m s :  1)  the g a m e w h i c h a p p e a l s to the g a m b l i n g i n s t i n c t of the c u s t o m e r .  The there is Contests  a r e s e t u p i n w h i c h the c u s t o m e r m u s t r e t u r n to the s a m e s t a t i o n o r s a m e c o m p a n y i n o r d e r to i n c r e a s e h i s c h a n c e s of w i n n i n g a p r i z e . i s m o t i v a t e d b y the h o p e of s o m e t h i n g f o r n o t h i n g .  2)  a n d c o u p o n s a r e a n i n d i r e c t m e t h o d of c u t t i n g p r i c e .  The  consumer  Give-aways,  bonuses,  F o r the r e g u l a r p r i c e  of g a s o l i n e , the c u s t o m e r r e c e i v e s a r e b a t e i n the f o r m of m e r c h a n d i s e o r refund certificates.  C a r e m u s t be t a k e n w i t h t h i s t y p e of t a c t i c that i t d o e s  not a n t a g o n i z e c o n s u m e r s .  A t l a n t i c R i c h f i e l d s e t up a p r o m o t i o n w h e r e  they gave away good quality c r y s t a l f o r coupons p u r c h a s e of g a s o l i n e .  r e c e i v e d on a t e n g a l l o n  I n t h e i r a t t e m p t to h a v e c u s t o m e r s b u y at one  station  at r e g u l a r i n t e r v a l s , t h e y i m p o s e d a l i m i t on the r e d e m p t i o n t i m e as w e l l a s r e s t r i c t i n g the c o u p o n s ' r e t u r n to the d i s t r i c t i n w h i c h i t was The  c o m p a n y , h o w e v e r , m i s c a l c u l a t e d the n o r m a l l e n g t h of t i m e  issued. between  64 p u r c h a s e s a n d the r a n g e of c o n s u m e r b u y i n g .  C u s t o m e r ' s e x c e e d i n g the  t i m e l i m i t o r t r y i n g to r e d e e m c e r t i f i c a t e s o u t s i d e t h e i r b u y i n g d i s t r i c t w e r e r e f u s e d the p r o m i s e d m e r c h a n d i s e . l o s s of b r a n d l o y a l t y was  C u s t o m e r r e f u s a l and  a costly mistake for Atlantic Richfield.  o u t l e t s a l s o g i v e d i s c o u n t p r i c e s on n o n - r e l a t e d r e c r e a t i o n a l , and  sporting equipment.  s t a t i o n b e c a u s e of the low  hence 3)  Some  products like gardening,  C u s t o m e r s a r e a t t r a c t e d to the  p r i c e s on o t h e r g o o d s .  T h i s has  become a  f a v o r i t e t a c t i c w i t h s t a t i o n s that a l r e a d y o f f e r g a s o l i n e at l o w e r p r i c e s .  A  s p e c i a l note m u s t a g a i n be m a d e a b o u t c r e d i t c a r d s .  i n n o v a t i o n i s u s e d e x t e n s i v e l y by the m a j o r f i r m s a n d point i n gasoline m a r k e t i n g s t r a t e g y .  represents  This a turning  A l t h o u g h the c r e d i t c a r d a f f o r d s the  m o t o r i s t a n a d d e d c o n v e n i e n c e , i t i n t u r n d e m a n d s a d i f f e r e n t t y p e of s i t e selection.  The  o i l c o m p a n i e s m u s t not o n l y c o n t i n u e  to b u i l d h i g h q u a l i t y  s t a t i o n s but a l s o m u s t l o c a t e on the c u s t o m e r ' s m a i n p a t t e r n of a u t o m o b i l e movement.  A  specific brand loyalty or brand preference  can  develop  b e c a u s e a n e t w o r k of s i t e s w i l l f i t i n t o a c u s t o m e r ' s t r a v e l p a t t e r n e v e n t h o u g h the c u s t o m e r m a y  own  s e v e r a l credit cards  of d i f f e r e n t brands,,  W i t h i n c r e a s e d i m p o r t a n c e b e i n g p l a c e d on the a b i l i t y of the c u s t o m e r to a l w a y s be w i t h i n e a s y r e a c h of h i s c r e d i t c a r d s t a t i o n , the w h o l e c o n c e p t of m a r k e t i n g s t r a t e g y c h a n g e s . of c r e d i t c a r d s  G r o w i n g a c c e p t a n c e and  use  i s f o r c i n g g a s o l i n e c o m p a n i e s to e s t a b l i s h l a r g e r g r o u p s of  b r a n d l o y a l c o n s u m e r s a n d to k e e p t h e i r l o y a l t y t h r o u g h p r o p e r n e t w o r k s of c o n v e n i e n t a n d a c c e s s i b l e s t a t i o n s . cannot always use  W h e n a c u s t o m e r f i n d s that he  h i s c r e d i t c a r d w h e n he w a n t s t o , o r i f he i s d i s p l e a s e d  65 w i t h the s e r v i c e he  r e c e i v e s at a b r a n d s t a t i o n , t h e n he m a y  his c a r d altogether. d i f f i c u l t to w i n credit cards claimed  A  back.  c u s t o m e r l o s t to a n o t h e r c r e d i t c a r d b r a n d i s v e r y The  f o l l o w i n g e x a m p l e w i l l i l l u s t r a t e the s t r e n g t h of  in a market situation.  "One  major-company executive" . . .  . . . "that c r e d i t c a r d c u s t o m e r s (as m u c h as 8 0 %  of m a n y s t a t i o n s ) a r e m u c h l e s s r e s p o n s i v e customers.  The  r e a s o n f o r this . . .  made a major decision regarding  c h a n g e s h a n d s " ( C a s s a d y , 1964,  i s that c r e d i t c a r d c u s t o m e r s h a v e  g a s o l i n e s t a t i o n p a t r o n a g e a n d w i l l not  p.  W h i l e the c r e d i t c a r d has  e s p e c i a l l y w h e n no  money  d a m p e n e d the i n f l u e n c e of the p r i c e b e t w e e n the m a j o r s .  s t i l l r e m a i n s , but now  proper selection becomes even m o r e  The  the i m p o r t a n c e of  critical.  T h i s i s a p e r f e c t e x a m p l e of how  an innovation may  cause a change  i n the e n v i r o n m e n t a n d i n t u r n c r e a t e a n e e d f o r a s h i f t i n s t r a t e g y . new  as  373).  o n l y i n c r e a s e d the c o m p e t i t i o n  e m p h a s i s on s i t e c o m p e t i t i o n  of the p a t r o n a g e  to p r i c e cuts t h a n c a s h  a r e s u l t be u s u a l l y a l e r t to p r i c e r e d u c t i o n s ,  c u t t e r , i t has  cease using  s t r a t e g i c d e c i s i o n i s t h e n r e f l e c t e d i n the e n v i r o n m e n t .  The  In t h i s  p a r t i c u l a r c a s e the s t r a t e g i c d e c i s i o n to a d o p t a n e t w o r k i s r e f l e c t e d d i r e c t l y onto the  landscape.  P r i c e strategy.  T h i s f o r m of m a r k e t i n g s t r a t e g y i s p r a c t i c e d by  a s m a l l m i n o r i t y of the f i r m s i n the m a r k e t . subsiduaries  or independents and  the t o t a l o u t l e t s i n a n y  given  The  firms are exclusively  a c c o u n t f o r no m o r e t h a n 15 p e r c e n t of  area.  66 The  p r i c e - c u t t e r r e a l i z e s that a s u b s t a n t i a l s e g m e n t o f the  is p r i c e c o n s c i o u s a n d t h e r e f o r e  market  i s w i l l i n g to take a d v a n t a g e o f l o w - p r i c e d  T h e p r i c e c o m p e t i t o r i s a l s o a w a r e that "the d e g r e e o f c r o s s - r .  offerings.  e l a s t i c i t y of d e m a n d f o r the p r o d u c t o f a n y one s e l l e r w i l l be s u f f i c i e n t l y low  s o that p r i c e r e d u c t i o n s m a y be m a d e w i t h o u t i n e v i t a b l e r e t a l i a t i o n .  A  s e l l e r m a y t h e n f e e l that he c a n u s e a p r i c e cut t o e x p a n d h i s t r a d e b e c a u s e he  believes  that the e f f e c t o n h i s c o m p e t i t o r s w i l l n o t be s o s e v e r e as. t o  c a u s e t h e m t o r e s o r t to c o u n t e r c u t t i n g "  The  ( C a s s a d y , 1964, p . 3 5 9 ) .  u s e of this s t r a t e g y is l i m i t e d by two f a c t o r s  p r i c e d i f f e r e n t i a l a n d the n u m b e r of p r i c e - c u t t e r s .  --the  s i z e of t h e  Major companies  will  u s u a l l y t o l e r a t e a 2£ d i f f e r e n t i a l ( C a s s a d y , 1964; W a r r e n & W o n g , 1961; Morrow,  1967) but,  i f the g a p w i d e n s a p r i c e w a r m a y e n s u e .  p e r c e n t a g e o f the g a s o l i n e  m a r k e t c a p t u r e d by p r i c e - c u t t e r s  A l s o i f the  reaches a  c e r t a i n l e v e l , s a y 20 p e r c e n t , t h e n the m a j o r s w i l l a g a i n t a k e a c t i o n . It. i s a k n o w n f a c t that the i n d e p e n d e n t p r i c e - c u t t e r u s u a l l y s u f f e r s the m o s t i n a n a l l o u t p r i c e w a r ( C a s s a d y & J o n e s , 1951; C a s s a d y , 1964, p , 363)^ therefore,  completely independent dealers  or retaliate i n such a campaign.  a r e r a r e l y the f i r s t t o i n i t i a t e  In f a c t , m a n y o f t h e m j u s t c l o s e  shop  d u r i n g a b a t t l e a n d l e t the m a j o r s f i g h t it o u t .  Since p r i c e - c u t t e r s for  r e l y on the s e g m e n t o f the p o p u l a c e that l o o k s  b a r g a i n s t h e y do n o t n e e d h i g h l y a c c e s s i b l e  facilities.  Such f r i l l s only increase  to the s t a t i o n ' s p e r f o r m a n c e .  locations or outstanding  o v e r h e a d a n d do n o t a d d s u b s t a n t i a l l y  Independents a r e not l a r g e enough to s u p p o r t  or benefit f r o m national a d v e r t i s i n g  s o p r o d u c t d i f f e r e n t i a t i o n is not  stressed.  E v e n if such f i r m s could financially support a credit c a r d  s y s t e m , their patrons  a r e not the type of c o n s u m e r that w o u l d u s e  P r i c e - c u t t e r s t a t i o n s f r e q u e n t l y l a c k s u c h f r e e f a c i l i t i e s as windshields,  checking o i l etc.  A  them.  washing  m o t o r i s t i s f o r t u n a t e to f i n d a w a s h r o o m .  B e c a u s e of t h e i r s m a l l n u m b e r , c o m p e t i t i o n a m o n g p r i c e - c u t t e r s is not f i e r c e .  M a n y of the s t a t i o n s r e l y on the p a t r o n a g e of r e p e a t  to m a i n t a i n a g o o d t h r e s h o l d . for p r i c e - c u t t e r s may  As  m u c h as 75-80 p e r c e n t of the  come f r o m repeat customers. ^  customers  business  L i k e the m a j o r s ,  the i n d e p e n d e n t s t a t i o n s u s u a l l y m a i n t a i n a s t a n d a r d p r i c e , a l l of t h e m b e i n g b e l o w the r e g u l a r m a r k e t by the s a m e a m o u n t .  In o r d e r to a t t r a c t the p r i c e - c o n s c i o u s c o n s u m e r to t h e i r s t a t i o n , the i n d e p e n d e n t s a l s o e n g a g e i n p r o m o t i o n a l coupons, bonuses.  g i m m i c k s like give-aways,  L o c a l a d v e r t i s i n g u s i n g f e a t u r e s a l e s of T B A  but i t s o v e r a l l e f f e c t i s u n k n o w n .  C a s s a d y (1964) c o n s i d e r s l a r g e  s i g n s to be of m a j o r i m p o r t a n c e to p r i c e c o m p e t i t i v e  Although  is used, "screaming  dealers.  p r i c e - c u t t e r stations a r e g e n e r a l l y less a c c e s s i b l e than  m a j o r company stations, some price competitive f i r m s (department stores) make use  of h i g h a c c e s s i b i l i t y as w e l l as p r i c e to a t t r a c t c u s t o m e r s .  u s u a l m e t h o d i s to p l a c e a s t a t i o n ( a g a i n one c l o s e p r o x i m i t y to a l a r g e p a r k i n g l o t . T h e and  operated  lacking many facilities) in p a r k i n g lot is i n e v i t a b l y owned  by the d e p a r t m e n t s t o r e .  ^Interview  with Mr.  The  H a y w a r d of H a y w a r d  Petroleum.  1  68 In the l a s t a n a l y s i s p r i c e c o m p e t i t o r s c a n the s t r a t e g y of m a r k e t s e g m e n t a t i o n . t h r o u g h p r i c e i n the c l a s s i c s e n s e . p a r t i c u l a r buying habits. t h e y cut e a c h o t h e r s  r e a l l y be s a i d to e m p l o y  T h e y a r e not r e a l l y  competing  T h e i r a p p e a l i s to a m a r k e t that  R e a l price competition  would necessitate  p r i c e s o r that t h e y cut p r i c e s b e l o w the l i m i t  t o l e r a t e d by the m a j o r s .  It i s g e n e r a l l y f e l t that c o n s u m e r s who  has that  generally patronize  p r i c e - c u t t i n g s e r v i c e s t a t i o n s c a n a l s o be p l a c e d i n t o a s p e c i f i c s o c i o economic class. the  Further  w o r k s h o u l d be done to e x p l o r e  t h i s f a c e t of  industry.  Summary.  N o n - p r i c e s t r a t e g i e s a r e e m p l o y e d by m a j o r s who  m a i n l y p r o d u c t d i f f e r e n t i a t i o n and  s i t e q u a l i t y to a t t r a c t c u s t o m e r s .  use Price  s t r a t e g y i s u s e d by i n d e p e n d e n t d e a l e r s to c a p t u r e a s p e c i f i c s e g m e n t of the  market.  Conclusion;  "  It was f i r m is v e r y  "•"  :  n o t e d e a r l y i n t h i s c h a p t e r that the n a t u r e of the  c o m p l e x and  that a n y  general  s t r u c t u r e , o r s t r a t e g y of a f i r m r e q u i r e s interesting aspect  s t a t e m e n t a b o u t the  rigid e m p i r i c a l evidence.  employ.  N o r t h A m e r i c a n g a s o l i n e r e t a i l m a r k e t i t was  gasoline  market.  An mix  L o o k i n g s p e c i f i c a l l y at the s e e n t h a t the a c t o r s  basic strategies: p r i c e competition  T h i s d i c h o t o m y was  character,  of the f i r m ' s i n t e r a c t i o n w i t h the e n v i r o n m e n t i s the  of m a r k e t i n g s t r a t e g i e s that i t m a y  e m p l o y two  modern  and n o n - p r i c e  s e e n to be t r u e e v e n at the l e v e l of the  concerned  competition.  Vancouver  CHAPTER  METHOD OF  4  ANALYSIS AND  RESULTS  T h e V a n c o u v e r g a s o l i n e s e r v i c e station i n d u s t r y has been c h o s e n as a c a s e s t u d y i n w h i c h to t e s t the h y p o t h e s i s that d i f f e r e n t m a r k e t i n g strategies can cause differences i n site quality.  T h e m e t h o d of a p p r o a c h  u s e d i n t e s t i n g the h y p o t h e s i s h a s b e e n to c o m p a r e a s a m p l e of t y p i c a l m a j o r c o m p a n y s t a t i o n s w i t h the p o p u l a t i o n of p r i c e - c u t t e r s t a t i o n s i n the c i t y of V a n c o u v e r .  N a t u r e of the V a n c o u v e r G a s o l i n e M a r k e t V a n c o u v e r ' s g a s o l i n e r e t a i l m a r k e t i s r e m a r k a b l y s i m i l a r to the one d e s c r i b e d i n the p r e c e d i n g s e c t i o n .  The Royal C o m m i s s i o n  Gasoline P r i c e Structure i n B r i t i s h Columbia (Morrow,  on  1967) a n d the s t u d y  of S e r v i c e S t a t i o n T u r n o v e r i n the L o w e r M a i n l a n d ( W a r r e n & W o n g , r e v e a l no o u t s t a n d i n g d i s s i m i l a r i t i e s b e t w e e n the V a n c o u v e r m a r k e t the N o r t h A m e r i c a n m a r k e t .  One  1961) and  i m p o r t a n t e x c e p t i o n to t h i s s t a t e m e n t ,  h o w e v e r , i s the f a c t that p r i c e - c u t t e r s i n V a n c o u v e r c o n t r o l a r e l a t i v e l y h i g h p r o p o r t i o n of the m a r k e t .  A s f a r as c a n be a s c e r t a i n e d ,  Fort  L a u d e r d a l e , F l o r i d a i s the o n l y m a r k e t i n N o r t h A m e r i c a w h e r e  price-  70 c u t t e r s s e l l a h i g h e r p r o p o r t i o n of g a s o l i n e t h a n i n V a n c o u v e r .  T h i s s i m i l a r i t y did not always e x i s t .  1  In the p e r i o d 1934 t o 1951  B r i t i s h C o l u m b i a i m p o s e d g o v e r n m e n t r e g u l a t i o n s o n the o i l i n d u s t r y . However,  "the e x p e r i e n c e w a s u n s a t i s f a c t o r y - i n v e s t m e n t f e l l o f f , s e r v i c e  deteriorated, price competition (Fleming,  1966, p . 7 7 ) .  By  e n d e d - a n d the i d e a was  abandoned"  2  1961 the i n d u s t r y a p p e a r s t o h a v e a s s u m e d a p o s t u r e c l o s e l y  r e s e m b l i n g one that n o r m a l l y o c c u r s t h r o u g h o u t the r e s t o f N o r t h A m e r i c a . W a r r e n a n d W o n g (1961) i n d i c a t e that a s y s t e m of p r i c e l e a d e r s h i p w a s e s t a b l i s h e d by this date.  T h e y s t a t e that i n B r i t i s h C o l u m b i a " p r i c e s o f  petroleum products are generally considered s e l l e r " (pp.  Judge W i l l i a m  w o r d that w a s i n t r o d u c e d  and  to be a d m i n i s t e r e d  b y the  4-5). T h i s f a c t w a s r e - e s t a b l i s h e d two y e a r s l a t e r b y a R o y a l  Inquiry appearing before A  well  Morrow:  e a r l y i n the h e a r i n g s w a s  'oligopoly'  i t was s u g g e s t e d b y s o m e that i t h a d a s i n i s t e r m e a n i n g .  P e r h a p s i t i s a n o v e r - s i m p l i f i c a t i o n to s t a t e that i t m e r e l y m e a n s l e a d e r s h i p b y a few o r one i n a n y n a m e d i n d u s t r y ; a n d w h e n t h e r e i s a p r i c e c h a n g e b y the l e a d e r , t h e r e w i l l be a n e a r l y response by others  i n the s a m e i n d u s t r y .  It i s a f a c t  that i n B r i t i s h C o l u m b i a t h e r e i s a r e c o g n i t i o n o f m u t u a l dependence.  I n a s i t u a t i o n s u c h a s we h a v e i n the i n d u s t r y i n  B r i t i s h C o l u m b i a , p r i c e l e a d e r s h i p i s f o u n d to be  present.  (1967, p. 126)  interview O i l (1970).  with M r . C l i f f G o d d a r d , R e g i o n a l M a n a g e r  Imperial '.  ^ G o v e r n m e n t r e g u l a t i o n of the p e t r o l e u m i n d u s t r y h a s o c c u r r e d i n o n l y one o t h e r p l a c e i n N o r t h A m e r i c a ; N o v a S c o t i a , 1 9 3 3 - 1 9 5 0 .  71 J u d g e M o r r o w g o e s on to d e f i n e e v e n m o r e p r e c i s e l y p r i c e l e a d e r s h i p as i s e v i d e n c e d by the f i n d i n g s . So,  t h e n , p r i c e l e a d e r s h i p c o u l d , p e r h a p s , be b e s t  described  as a s i t u a t i o n w h e r e s o m e c o m p a n y i n e a c h t e r r i t o r y a c c e p t the onus of f o r m a l l y r e c o g n i z i n g c u r r e n t and i f i t m a k e s a n y the p r i c e l e a d e r .  must  conditions  e r r o r s i t w i l l s o o n l o s e i t s p o s i t i o n as By  the s a m e r e a s o n i n g ,  I do not m e a n to  s a y that a p r i c e l e a d e r c a n s e t p r i c e s at h i s own and f o r c e o t h e r m a r k e t e r s to c o n f o r m .  (1967, p.  pleasure 126)  A l t h o u g h J u d g e M o r r o w (1967) c l a i m s that e v i d e n c e d o e s not p o i n t to a s i n g l e p r i c e l e a d e r (p. 126),  he d o e s m e n t i o n e a r l i e r i n the  that " i t w o u l d a p p e a r that I m p e r i a l ( w h i c h i n c l u d e s H o m e ) has s h a r e of the t o t a l m a r k e t a n d h a s the g a s o l i n e o p e r a t i o n s  report  the l a r g e s t  p r e s u m a b l y b e c o m e the p r i c e l e a d e r i n  i n B r i t i s h C o l u m b i a " (p. 27).  A  1967  consumer  s u r v e y r e v e a l s the a p p r o x i m a t e m a r k e t p e r c e n t a g e s of e a c h c o m p a n y i n the V a n c o u v e r a r e a ( F i g u r e 5).  The  g a s o l i n e s t u d i e s a l s o r e v e a l that a n u m b e r of i n d e p e n d e n t  s t a t i o n s o p e r a t e o u t s i d e the g e n e r a l s t r u c t u r e of p r i c e l e a d e r s h i p . W a r r e n and  W o n g (1961) s t a t e t h a t the " i n d e p e n d e n t s a r e i n a p o s i t i o n to  o p e r a t e on a c u t - p r i c e b a s i s b e c a u s e of the f a c t that t h e i r s e r v i c e o f f e r i n g s are restricted . . . .  Thus these c u t - p r i c e operators  o r m a r g i n advantage and use  t h i s as a c o m p e t i t i v e  have a decided  w e a p o n " (p. 11).  a l s o r e p o r t that 8 to 10 p e r c e n t of the g a s o l i n e m a r k e t i n the  a p p e a r at a n y  p o i n t as p u b l i c e v i d e n c e i n the p r o c e e d i n g s .  thus r e l u c t a n t to r e v e a l s u c h f i g u r e s . was  not a b l e to s e c u r e  As  They  Vancouver  ^ G a l l o n a g e s a l e s of i n d i v i d u a l c o m p a n i e s o r s t a t i o n s do the m a j o r f i r m s r e g a r d t h i s k n o w l e d g e as c o m p e t i t i v e  price  not  a rule,  advantage and  are  It i s f o r t h i s r e a s o n that the a u t h o r  d a t a on the t o t a l s a l e s v o l u m e of i n d i v i d u a l c o m p a n i e s .  72  Metropolitan*  British**  V a n c o u v e r  I m p e r i a l  2 5%  H o m e  23%  30%  7%  2%  7%  C h e v r o n  14%  Standard  C a n a d a * **  C o l u m b i a  2%  11%  9%  7%  2%  Shell  20%  17%  15%  Gulf  12%  14%  12%  2%  4%  3%  10%  12%  Royalite  T e x a c o  "  F I G U R E  5:  6%  1967  C o n s u m e r  question, do  you  usually  (Source:  ^t,  respondents  13,938  respondents  representing best  only  buy?  asking of  the  gasoline  "4 Daily  Newspaper  Association)  respondents  2,044  One  brand  Canadian  Publishers  451  survey  "What  should not the  crude  m a r k e t  r e g a r d share  indications.  of  these each  results  as  company.  accurately T h e y  are  at  a r e a  belongs  to  specifically  the  per  of  4.9  cent  cent  of  the  per  5.7  was  however,  the  was  2£  that  price  per  branders  gallon  p.  the  oil  that  short  the  the  "It  general  these  r u n ,  suppliers  so  of  branders  price  as  to  and  been  sales.  He  also  study  the  invite  only  price  pains  stations  cent  by  the  and  the  figures  independents  to p o i n t  and  per  2.2  out  D o m i n i o n  practice  Wong  interfere  stations  of independent  approximately  major  indicate  and m a j o r  cents  2  brands.  satisfactory  seriously  9. 7 p e r  for  W a r r e n and  strong  operated  and  indicated  station  M o r e  65).  p.  within  a  for  H e n d e r s o n s ,  by  general  of the  to  b r a n d e r s ^  took  independent  experience  appear  increasing.  A s  per  (1967,  to k e e p  level  is  accounted  gallonage  sales  between  has  not  but  S i m p s o n s - S e a r s ,  operators  do  share  private  gasoline  m a j o r s .  Inquiry  differential  that  province  volumes  R o y a l  this  in Metropolitan V a n c o u v e r  average  the  that  states  of total  W o o d w a r d s ,  high  and  stations  i n the  for  and private  of the  major  that  gallon.  differential,  the  service  n u m b e r  than  exceedingly  that  Report  respectively  Both  in  the  concluded  greater  had  independents  M o r r o w  total  cent  M o r r o w  the  retaliation" ( W a r r e n  the  &  per  With such  volume  with  n o n -  of  a  sales  markets  Wong,  and  of  1961,  10).  entry  T h e  major  companies  of  cut-rate  stations  manufacturer  surplus  by  selling  ^Private  has  an  large  often  into  excess  is  a  of  t e r m  the  market.  refinery  quantities  branders  the  create  conditions  This  capacity  gasoline  to  synonymous  n e c e s s a r y  occurs  and tries  when  to  independent  with  get  a  for  m a j o r  r i d of  dealers  price-cutters.  at  its  a  74 very  low  price.  gasoline dealers  An  e x a m p l e of t h i s h a p p e n e d i n 1957  got i n t o p r o d u c t i o n  the t i m e w h e n B .  A.  O i l had  i n the V a n c o u v e r m a r k e t .  b u i l t a new  B.  C.  The  t o o k 13 p e r  corporate  r e s u l t was  cut-rate "This  r e f i n e r y i n P o r t M o o d y and  p r o d u c e d g a s o l i n e to a p o i n t w h e r e t h e y h a d by-products.  w h e n the  to d u m p i t to get the  was over-  other  that i n a b o u t e i g h t y e a r s the c u t - r a t e r s i n  c e n t of the g a s o l i n e r e t a i l m a r k e t a w a y f r o m the h u g e  oil companies.  A n o t h e r i n d i c a t i o n of the l a c k of d i r e c t p r i c e c o m p e t i t i o n f a c t "that s e r v i c e s t a t i o n o p e r a t o r s by t h e i r c o m p e t i t o r s "  i s the  d i d not s e e m to k n o w the p r i c e s  ( M o r r o w , 1967,  p.  charged  54).  B o t h s t u d i e s a l s o i n d i c a t e that i t i s o n l y a c e r t a i n s e g m e n t of the m a r k e t that f r e q u e n t p r i c e - c u t t e r s . prices  " W h i l e t h e r e was  a d i v e r s i t y of  . . . the e v i d e n c e i n d i c a t e d a l a c k of a w a r e n e s s of t h i s d i v e r s i t y by  motorists  and  e v e n by d e a l e r s  s a y s that "some m o t o r i s t s d i f f e r e n t i a l of o n l y l £ " (p.  The Imperial  ( M o r r o w , 1967,  w i l l buy  p.  55).  But,  Morrow  also  n o n - b r a n d g a s o l i n e e v e n at a p r i c e  67).  R o y a l C o m m i s s i o n a l s o p r o b e d the q u e s t i o n of c r e d i t c a r d s .  O i l m a d e the c l a i m that the c r e d i t c a r d " i s a s e r v i c e p r o v i d e d  competitive  r e a s o n s and  i t i s e v i d e n t that a l a r g e a n d  for  growing proportion  a l l r e t a i l c u s t o m e r s d e s i r e to h a v e i t " ( I m p e r i a l O i l , 1967,  p.  of  14).  M o r r o w ' s f i n d i n g s i n d i c a t e d that the a v e r a g e c o s t of c r e d i t c a r d s i s a b o u t l/2£  p e r g a l l o n of t o t a l g a s o l i n e s a l e s of s e r v i c e s t a t i o n s and  ^Information f r o m a letter f r o m Mr. Franchises,  1970.  Ron  a b o u t l-l/2£  M a r c o u x of M c C a n  75 p e r g a l l o n of c r e d i t c a r d s a l e s .  A l t h o u g h t h i s m e a n s that n o n - c r e d i t c a r d  u s e r s a r e p a y i n g f o r the c o n v e n i e n c e  d e r i v e d by t h o s e w h o u s e a c r e d i t  c a r d , M o r r o w a d m i t t e d that t h e r e w a s v e r y l i t t l e t h a t c o u l d be done to c o r r e c t the s i t u a t i o n .  The  d i s c u s s i o n thus f a r w o u l d s e e m t o d e m o n s t r a t e the f a c t t h a t  V a n c o u v e r ' s g a s o l i n e m a r k e t i s v e r y s i m i l a r to t h o s e o b s e r v e d The  elsewhere.  f o l l o w i n g t a b l e s w i l l g i v e a m o r e d e t a i l e d p i c t u r e o f the p r e s e n t  s i t u a t i o n i n the city of V a n c o u v e r . ^  T a b l e 1 l i s t s , u n d e r the h e a d i n g s  of ' p r i c e c o m p e t i t o r s ' a n d 'non-  p r i c e c o m p e t i t o r s , ' a l l the m a j o r , s u b s i d u a r y , a n d i n d e p e n d e n t o p e r a t i n g i n the C i t y o f V a n c o u v e r .  firms  T a b l e 2 g i v e s a b r e a k d o w n of a t o t a l  n u m b e r o f 340 n o n - p r i c e c o m p e t i t o r s a c c o r d i n g to c o m p a n y o w n e r s h i p . T h e s e stations p u m p a n e s t i m a t e d 69,621,000 g a l l o n s of g a s o l i n e .  Table 3  g i v e s a s i m i l a r b r e a k d o w n f o r the 20 p r i c e c o m p e t i t o r s t a t i o n s but a l s o includes some percentage  f i g u r e s o n g a l l o n a g e s h a r e o f the m a r k e t .  Price  c o m p e t i t o r s p u m p a n e s t i m a t e d - 1 0 , 870, 000 g a l l o n s a n d c o n t r o l a p p r o x i mately  1 5 . 6 1 p e r c e n t o f the m a r k e t .  A  f e w m i n o r d i f f e r e n c e s a r e a l s o e v i d e n t i n the m a r k e t .  O b s e r v a t i o n , has "screaming"  s h o w n that p r i c e - c u t t e r s do n o t e m p l o y the t a c t i c o f  signs.  A l t h o u g h t h i s m a y be due to s o m e e x t e n t to c i t y z o n i n g  "^Since 1966 the e f f e c t s o f r e s t r i c t i v e z o n i n g h a s c o m e to p l a y a p a r t i n the g a s o l i n e i n d u s t r y o f V a n c o u v e r .  Since zoning does not b e a r  d i r e c t l y o n the c o m p a n y ' s ' c h o i c e ' o f s t r a t e g y (as i t p r e s e n t l y s t a n d s ) , t h i s t o p i c w i l l be d i s c u s s e d a t a l a t e r d a t e .  76 TABLE  1  Gasoline Retail F i r m s in Vancouver Price  Market  Non-Price  Competitors  Competitors  Mohawk O i l Co. L t d . Pay-N-Save  Petroleums  Woodward's C a l V a n Auto  Supply  Dominion Vancouver  Motors  Cardinal C a r Wash Hayward  Petroleum  Merit O i l E c o n o . .......  O * •fto « o  .Home  ( o w n e d by)  Oil*  Royalite*. .. . ( o w n e d by)  . Imperial O i l (Esso) .  Gulf O i l S h e l l of C a n a d a S t a n d a r d o f B . C.** Texaco Union O i lCo. P a c i f i c 66  * non-price competitors **company operated stations a r e known as S T A N D A R D while d e a l e r o p e r a t e d stations a r e d e s i g n a t e d as C H E V R O N  TABLE  2  Non-Price Competitors Company  Chevron  N u m b e r of Stations  (1970)  % of n o n - p r i c e competitor stations  % total stations  Standard  78 (85) 7  Gulf  67  19.7  18. 6  Shell Esso Home  50  14. 7  49 33  14.4 9.7  13.9 13. 6 9.2  28 15  4.4  7.8 4.2  2.7  2. 5  1.2  1.1  Texaco Royalite P a c i f i c 66 U n i o n 76  9 4 340  (23.6)  8.2  100. 0  94. 12  TABLE  3  Price Competitors Company  N u m b e r of stations  %  of p r i c e  competitor  %  of t o t a l  stations  (1970) %  sales of p r i c e competitor market  stations  % sales p e r station in price  competitor  market  Mohawk  7  35. 0  1.94  15.92  2.27  Pay-N-Save  4  20. 0  1.18  15.27  3.82  Econo  2  10.0  .56  14.44  7.22  Woodward's  2  10. 0  .56  26. 31  13. 15  C a l Van Auto  1  5.0  .28  5. 70  5.70  Haywards  1  5.0  .28  4.97  4.97  Merit  1  5.0  .28  8. 00  8. 00  Dominion  1  5.0  .28  7.91  7.91  Cardinal  1  5.-0  .28  1.47  1.47  100. 0  5.88  TOTAL  20  ,  100.0  78 r e g u l a t i o n s , the a v e r a g e p r i c e - c u t t e r ' s s i g n i s f a r l e s s v i s i b l e t h a n i t m i g h t be.  T h i s i s e s p e c i a l l y t r u e i n the a d v e r t i s e m e n t  It w a s a l s o o b s e r v e d that a f e w s t a t i o n s o p e r a t e At; a f u l l 2£ b e l o w t h e i r d i r e c t  on a p r i c e d i f f e r e n t i a l of  competitors.  Although p r i c e competitive  s t a t i o n s a c c o u n t f o r o n l y 5.88 p e r c e n t  of the t o t a l n u m b e r of o u t l e t s t h e i r s a l e s r e p r e s e n t market share.  of p r i c e d i f f e r e n t i a l s .  Such a large share  15.61 p e r c e n t of the  o f the m a r k e t i s m o r e the e x c e p t i o n  the r u l e i n o t h e r N o r t h A m e r i c a n m a r k e t s .  Several company  than  officials  i n d i c a t e d that the m a r k e t c o n t r o l l e d b y i n d e p e n d e n t s w a s o n l y 12 p e r c e n t . This may  be due t o the f a c t that t h e y w e r e c o n s i d e r i n g  Metropolitan  V a n c o u v e r a s w e l l as l e a v i n g out E c o n o w h i c h i s c o n t r o l l e d b y I m p e r i a l . Such a statement would then s e e m i n order..  L i t t l e d i f f e r e n c e i n the m a j o r b r a n d s t a t i o n s i s e v i d e n t ,  except  f o r the f a c t that t h e y a p p e a r to be o f a g e n e r a l l y l o w e r q u a l i t y t h a n elsewhere.  those  H o w e v e r , e m p i r i c a l t e s t s s h o u l d be m a d e i n o r d e r to c o n f i r m  this s t a t e m e n t .  A l t h o u g h C a s s a d y a n d J o n e s (1951) c l a i m that t h e r e i s  u s u a l l y a d i r e c t c o r r e l a t i o n b e t w e e n the n u m b e r o f s t a t i o n s a f i r m h a s i n a s p e c i f i c m a r k e t a n d that f i r m ' s s h a r e exist in Vancouver.  o f the m a r k e t , t h i s s i t u a t i o n d o e s n o t  S t a n d a r d h a s m o r e s t a t i o n s (85) t h a n d o e s I m p e r i a l /  H o m e (83) but I m p e r i a l a p p e a r s to h a v e a c o n s i d e r a b l e edge i n m a r k e t share.  Summary.  E x c e p t f o r the f a c t that a r e l a t i v e l y l a r g e p r o p o r t i o n  of the m a r k e t i s . c o n t r o l l e d b y p r i c e - c u t t e r s , the V a n c o u v e r g a s o l i n e m a r k e t i s v e r y s i m i l a r to g a s o l i n e m a r k e t s e l s e w h e r e .  The marketing strategies  79 e m p l o y e d i n V a n c o u v e r a r e the s a m e as t h o s e u s e d i n o t h e r a r e a s . b r a n d c o m p a n i e s use  the s t r a t e g i e s of p r o d u c t d i f f e r e n t i a t i o n a n d  l o c a t i o n to a t t r a c t c u s t o m e r s , w h i l e the i n d e p e n d e n t d e a l e r s of p r i c e to a p p e a l to a s p e c i f i c m a r k e t  Outline  convenient the  strategy  segment.  of A n a l y s i s In the C a l i f o r n i a s t u d y b o t h g a l l o n a g e a n d  as o v e r t m e a s u r e s of p e r f o r m a n c e ( C l a u s  1969,  survival ratio were used p. 28).  h o w e v e r , g a l l o n a g e as a m e a s u r e of p e r f o r m a n c e was T h i s was  use  Major  necessitated  In V a n c o u v e r ,  used exclusively.  b e c a u s e the s u r v i v a l r a t i o as a p e r f o r m a n c e  w o u l d h a v e b e e n m e a n i n g l e s s i n the p r e s e n t c i r c u m s t a n c e s .  As  measure  was  noted  e a r l i e r , i n d e p e n d e n t p r i c e - c u t t e r s h a v e o n l y m o v e d i n t o the m a r k e t 1957  w h e n t h e r e was  a g l u t of e x c e s s g a s o l i n e  available.  e n o u g h t i m e f o r a n o r m a l m a r k e t s i t u a t i o n to e v o l v e a n d a l s o the f a c t that V a n c o u v e r C i t y C o u n c i l h a s of p r e v e n t i n g the b i r t h of new has  p r e v e n t s the d e a t h of o l d o n e s .  There is  This  policy  which recommended a " r e s t "  t h i s g o v e r n m e n t i n t e r v e n t i o n p r e v e n t the b i r t h of new  new  mature.  initiated a conscious policy  i n the b u i l d i n g of s e r v i c e s t a t i o n s f o r at l e a s t f i v e y e a r s .  old, outdated and  T h i s is hardly-  s t a t i o n s i n the m a r k e t p l a c e .  i t s o r i g i n s i n the M o r r o w r e p o r t of 1967  since  O i l companies are  Not  only  does  s t a t i o n s but i t a l s o  r e l u c t a n t to c l o s e  out  p o o r l y l o c a t e d s i t e s f o r f e a r that p e r m i s s i o n to b u i l d a  s t a t i o n i n i t s p l a c e w i l l not be g r a n t e d .  The  f e a r of l o s i n g i n c o m e  by  s h u t t i n g d o w n a s t a t i o n f o r c e s the o i l c o m p a n i e s to m a i n t a i n s i t e s that w o u l d n o r m a l l y s u f f e r a n a t u r a l d e a t h i n the m a r k e t  place.  Q u a l i t y r a t i n g s f o r e a c h s t a t i o n w e r e o b t a i n e d by u s i n g a s i t e  80  r a t i n g i n s t r u m e n t s i m i l a r to the one d e v e l o p e d by C l a u s p a r a m e t r i c c o r r e l a t i o n a l a n a l y s i s was discover  (1969).  A  non-  t h e n p e r f o r m e d on the d a t a to  i f there were any s i g n i f i c a n t relationships between site quality  a n d the m a r k e t i n g s t r a t e g y u s e d b y the two g r o u p s  of m a r k e t e r s .  Figure 6  i l l u s t r a t e s the t h r e e s t a g e m o d e l u s e d i n the d a t a a n a l y s i s .  An  e x a m i n a t i o n of the c o r r e l a t i o n a l m a t r i x e s p r o d u c e d by the  three stages reveals  m a r k e d d i f f e r e n c e s i n the q u a l i t a t i v e r e q u i r e m e n t s f o r  the two t y p e s o f m a r k e t i n g s t r a t e g y e m p l o y e d i n the V a n c o u v e r  A  market.  s m a l l case study, examining three s e r v i c e stations in close  p r o x i m i t y to one a n o t h e r , was  a l s o p e r f o r m e d i n a n a t t e m p t to g a i n f u r t h e r  i n s i g h t i n t o the a c t u a l e f f e c t s o f d i f f e r e n t s t r a t e g i e s on the l a n d s c a p e .  Sampling  Procedures To  r e d u c e the e f f e c t s of z o n i n g r e g u l a t i o n s  as an  intervening  Q v a r i a b l e i n the e x p e r i m e n t ,  the s a m p l e of s t a t i o n s was  s i n g l e p o l i t i c a l a r e a ; the C i t y o f V a n c o u v e r .  In t h i s w a y  selected from  a l l the s t a t i o n s i n  the s t u d y w o u l d be i n f l u e n c e d to the s a m e d e g r e e by z o n i n g b y - l a w s . was  p o i n t e d out e a r l i e r , g o v e r n m e n t r e g u l a t i o n s  a  As  c a n often d r a s t i c a l l y  a f f e c t the q u a l i t y of a p a r t i c u l a r r e t a i l s i t e . In o r d e r to s e c u r e a s a m p l e of m a j o r c o m p a n y s e r v i c e with their respective  As  was  stations  y e a r l y gallonages, four m a j o r o i l companies  n o t e d i n C h a p t e r 2, z o n i n g r e g u l a t i o n s , f i r e c o d e s , e t c . ,  c a n g r e a t l y a f f e c t the q u a l i t y of a r e t a i l s i t e .  T o test f o r qualitative  d i f f e r e n c e s b e t w e e n s i t e s , the e f f e c t of g o v e r n m e n t a l i n t e r v e n t i o n r e m a i n constant.  must  81  STAGE  1 Major  Stations Gallonage  M i c r o scores M a c r o scores  of  "s  Majors  Total scores  STAGE  2 Independent  Stations  M i c r o scores |  Gallonage r  M a c r o scores Total scores  STAGE  of  s  •r<  |  Independents  3 All  Stations  Micro scores |  r  Gallonage  s  M a c r o scores  of  Total scores  All Stations  6£d, i i  FIGURE THREE  N 3  N  6. STAGE  MODEL OF  CORRELATIONAL  ANALYSIS  82  c o n t r o l l i n g 69.7 p e r c e n t of a l l s t a t i o n s i n the V a n c o u v e r m a r k e t w e r e a s k e d to p a r t i c i p a t e i n the e x p e r i m e n t . It was  f e l t that t h e s e f o u r  c o m p a n i e s a d e q u a t e l y r e p r e s e n t e d the g e n e r a l m a r k e t of m a j o r stations.  company  E a c h of t h e s e f o u r c o m p a n i e s w e r e a s k e d to s u p p l y a l i s t of  s t a t i o n s that f e l l w i t h i n the m e d i a n r a n g e of y e a r l y g a l l o n a g e s f o r t h e i r particular company. at  random  From  e a c h company's l i s t , s i x stations w e r e c h o s e n  p r o d u c i n g a s a m p l e of 24 s t a t i o n s .  A f t e r r a t i n g the w h o l e  s a m p l e , one s t a t i o n h a d t o be e l i m i n a t e d b e c a u s e of p e c u l i a r  circumstances  i n that s t a t i o n ' s i m m e d i a t e a r e a .  It was  h o p e d that b y t h i s p r o c e d u r e a s a m p l e o f t y p i c a l m a j o r  c o m p a n y s e r v i c e s t a t i o n s c o u l d be e s t a b l i s h e d .  S i n c e the m a j o r  s t a t i o n s w e r e o n l y to be u s e d a s a c o m p a r a t i v e m e a s u r e n e c e s s a r y to t a k e a r a n d o m  it was  company  not  s a m p l e o f a l l m a j o r s t a t i o n s i n the a r e a .  This  p r o c e d u r e w o u l d n o t o n l y be v e r y t i m e c o n s u m i n g , but i t w o u l d a l s o p r o d u c e a m u c h h i g h e r v a r i a n c e w i t h i n the c o m p a r i s o n g r o u p .  P r o b l e m s would  h a v e a l s o b e e n e n c o u n t e r e d w i t h the o i l c o m p a n i e s , as t h e y a r e g e n e r a l l y r e l u c t a n t to r e l i n q u i s h g a l l o n a g e f i g u r e s on i n d i v i d u a l s t a t i o n s .  Although  they were co-operative i n supplying gallonage figures f o r s i x stations, a s k i n g f o r 20 o r 30 s u c h f i g u r e s w o u l d h a v e o n l y m e t w i t h r e f u s a l . s a m p l e that was  The  e v e n t u a l l y s e l e c t e d a p p e a r e d to be v e r y h o m o g e n e o u s a n d  r e p r e s e n t e d the a v e r a g e g a l l o n a g e s e r v i c e s t a t i o n f o r m a j o r c o m p a n i e s „ ^ T h e o r i g i n a l n u m b e r of 24 s a m p l e s t a t i o n s was  ^In  c h o s e n b e c a u s e i t was  V a n c o u v e r , i n 1969 the a v e r a g e m a j o r c o m p a n y g a s o l i n e  s t a t i o n p u m p e d 210,000 g a l l o n s . i n the s t u d y s a m p l e was  The average gallonage f o r m a j o r  223,000 g a l l o n s .  very  service  stations  83  c l o s e t o the n u m b e r o f p r i c e - c u t t e r s i n the s a m e m a r k e t a r e a . T a b l e 4 gives  f i g u r e s f o r the m e a n , m e d i a n , a n d r a n g e o f  gallonages f o r m a j o r and independent stations.  TABLE Mean,  4  M e d i a n , a n d R a n g e of G a l l o n a g e s f o r M a j o r a n d  I n d e p e n d e n t S t a t i o n s i n the V a n c o u v e r S t u d y ( g a l . / y r . )  Mean  T y p e of Station Majors  (N=23)  Independents  The  (N=20)  population  Median  Range  223,000  220,000  140,000 - 350,000  450,000  545 > 000  100,000 - 2,1000,000  of i n d e p e n d e n t p r i c e - c u t t e r s t a t i o n s i n the V a n c o u v e r  m a r k e t t o t a l l e d 20 a t the t i m e o f the s t u d y .  B e c a u s e the i n d e p e n d e n t  c o m p a n i e s w e r e r e l u c t a n t t o p a r t i c i p a t e , i t w a s n e c e s s a r y to o b t a i n  their  g a l l o n a g e f i g u r e s f r o m a n u m b e r of o t h e r s o u r c e s i n c l u d i n g i n t e r v i e w s  with •  station o p e r a t o r s , e s t i m a t e s f r o m c o m p e t i t o r s , and f i g u r e s g i v e n by suppliers.  C r o s s c h e c k s on e s t i m a t e d g a l l o n a g e s r e v e a l e d  Table 4 reveals  few  discrepancies.  that the r a n g e of g a l l o n a g e s f o r the p r i c e - c u t t e r s  i s m u c h l a r g e r t h a n f o r the s a m p l e o f m a j o r s t a t i o n s .  T h i s was  anticipated  s i n c e the s a m p l i n g p r o c e d u r e u s e d i n s e l e c t i n g m a j o r s t a t i o n s was d o n e i n o r d e r t o r e d u c e the v a r i a n c e .  The Table also reveals  p r i c e - c u t t e r p u m p s m o r e t h a n - t w i c e as m u c h g a s o l i n e m a j o r station.  that the a v e r a g e as d o e s the a v e r a g e  T h i s w a s a l s o a n t i c i p a t e d , s i n c e the p r i c e - c u t t e r m u s t  pump more gasoline  than m a j o r s t a t i o n s j u s t to b r e a k e v e n .  This is  n e c e s s a r y b e c a u s e o f the l o w e r p r i c e s c h a r g e d by the i n d e p e n d e n t s a n d  84 b e c a u s e the i n d e p e n d e n t s do not r e c e i v e m u c h i n c o m e f r o m b a c k r o o m TBA,  work,  and other s e r v i c e s .  Marketing Strategies The four largest companies  p a r t i c i p a t i n g i n the s t u d y w e r e  I m p e r i a l , Gulf, Shell, and Standard. oil companies,  A l l a r e c o n s i d e r e d to be  "major"  e a c h c o n t r o l l i n g at l e a s t two p e r c e n t of the N o r t h  m a r k e t a n d i n the c a s e of V a n c o u v e r , p e r c e n t of the m a r k e t .  These  American  e a c h one c o n t r o l l i n g m o r e t h a n t e n  companies  as w e l l as o p e r a t i n g a n a t i o n a l c r e d i t c a r d  also sponsor national advertising system.  T o investigate even f u r t h e r each company's r e t a i l i n g p r a c t i c e s i n Vancouver,  marketing personnel for each company were interviewed  and  a s k e d the f o l l o w i n g q u e s t i o n s : 1.  Do  all your Vancouver  A l l companies  answered  s t a t i o n s s e l l g a s o l i n e a t the s a m e p r i c e ?  n o to t h i s q u e s t i o n ; h o w e v e r , a l l f o u r  q u a l i f i e d t h e i r s t a t e m e n t s s a y i n g that the f i n a l r e t a i l p r i c e was by the d e a l e r .  It was  a l s o s t a t e d that the c o m p a n i e s  determined  t r i e d to m a i n t a i n a  fairly uniform price among their brand stations. 2.  W h a t i s the r a n g e i n p r i c e f o r y o u r b r a n d of g a s o l i n e i n  Vancouver? A l l r e p l i e d that l£ to 2£ was  the u s u a l r a n g e but that o c c a s i o n a l  e x c e p t i o n s d i d o c c u r , a g a i n d e p e n d i n g on the i n d i v i d u a l d e a l e r . 3. bonuses,  Do  your stations participate i n contests, games,  reduced merchandise, A l l companies  answered  give-aways,  etc.? y e s , s a y i n g that f r o m t i m e to t i m e t h e i r  85 stations did engage i n s u c h p r a c t i c e s .  They a l l considered such promotional  d e v i c e s as s t a n d a r d m a r k e t i n g p r o c e d u r e , s t a t i n g that t h e s e w e r e associated for  with a n a t i o n a l o r r e g i o n a l a d v e r t i s i n g c a m p a i g n and  usually  thus  ran  o n l y a l i m i t e d s p a n of t i m e . 4.  Do  your stations u s u a l l y s e l l gasoline  at the s a m e p r i c e  as  that t h e i r s t a t i o n s  usually  other m a j o r s ? The met  s t a n d a r d a n s w e r to t h i s q u e s t i o n was  the p r i c e of the l a r g e s t c o m p e t i t o r r e s u l t i n g i n a f a i r l y u n i f o r m  price  t h r o u g h o u t the m a r k e t . 5.  Do  ^  s o m e s t a t i o n s i n the m a r k e t c o n t i n u a l l y s e l l g a s o l i n e  p r i c e l o w e r than y o u r c o m p a n y The  a n s w e r was  6.  How  much  stations?  a unanimous yes.  c u t t e r , o r i n d e p e n d e n t was  at a  The  term non-brander, p r i c e -  f r e q u e n t l y u s e d to d e s c r i b e  these stations.  lower?  D e p e n d i n g on the s t a t i o n , a l l r e s p o n s e s i n d i c a t e d that p r i c e cutters usually sold gasoline 7.  C o u l d you  f o r 2£ to 4£ b e l o w the  s u p p l y a l i s t of t h e s e  A l l four c o m p a n i e s had  stations?  a l i s t of s o c a l l e d ' h o n - b r a n d e r s " a l o n g  w i t h e a c h s t a t i o n ' s e s t i m a t e d g a l l o n a g e f o r 1969. s u p p l i e d the a u t h o r w i t h a c o p y of t h e i r l i s t s . a map did  "normal" market price.  Two  companies  Another company maintained  of a l l n o n - b r a n d s t a t i o n s w i t h t h e i r e s t i m a t e d g a l l o n a g e s .  m a i n t a i n a l i s t but was  r e l u c t a n t to r e v e a l i t to the a u t h o r .  The The  l i s t s r e c e i v e d as w e l l as the m a p  m a t c h e d up p e r f e c t l y r e g a r d i n g  and  deviated  l o c a t i o n of n o n - b r a n d e r s a n d  ages.  generously  fourth two  the  name  only slightly in e s t i m a t e d g a l l o n -  When q u e s t i o n e d f u r t h e r about s p e c i f i c independent stations  all  86 marketing personnel  w e r e r e a d i l y f a m i l i a r with e a c h station's o p e r a t i n g  procedures. 8.  W h a t p e r c e n t a g e of the V a n c o u v e r m a r k e t do n o n - b r a n d e r s  price-cutters  or  control?  Answers ranged from  11 p e r  q u a l i f i e d as r e f e r r i n g to m e t r o p o l i t a n  c e n t to 15 p e r c e n t , but s o m e w e r e V a n c o u v e r r a t h e r t h a n the C i t y of  Vancouver.  Interviews  w i t h the c o m p a n i e s w o u l d s e e m to i n d i c a t e that t h e y  f o l l o w a p r a c t i c e of p r i c e l e a d e r s h i p i n the V a n c o u v e r m a r k e t ; h o w e v e r , m i n o r f l u c t u a t i o n s i n p r i c e of g a s o l i n e do o c c u r dealers.  This confirms  b e c a u s e of i n d i v i d u a l  J u d g e M o r r o w ' s f i n d i n g s of 1967.  bonuses, give-aways, etc., may  be r e g a r d e d as a f o r m of p r i c e - c u t t i n g ,  t h i s a l s o s e e m s to be f a i r l y u n i f o r m  a m o n g a l l c o m p a n i e s studied and  t h e r e f o r e not c r e a t e a l a s t i n g p r i c e d i f f e r e n t i a l . the c o m p a n i e s i n t e r v i e w e d marketing strategy.  recognized  It w o u l d a l s o a p p e a r that  did and w e r e f u l l y i n f o r m e d  operations.  of the s a m p l e of m a j o r c o m p a n y s t a t i o n s  r e v e a l e d an a v e r a g e p r i c e of 45. 9£ p e r i m p e r i a l g a l l o n f o r r e g u l a r 50. 9£ p e r g a l l o n f o r p r e m i u m .  occurred  of  A l t h o u g h the m a j o r s t h e m s e l v e s d i d not f o l l o w t h i s  F i e l d o b s e r v a t i o n i n 1970  and  would  p r i c e - c u t t i n g as a d i f f e r e n t f o r m  p r a c t i c e t h e y w e r e a c u t e l y a w a r e of t h o s e who on a l l s u c h  Although games,  P r i c e deviations for regular  o n l y i n f o u r i n s t a n c e s w h e r e a d i f f e r e n t i a l of l£ was  P r e m i u m g a s o l i n e r e v e a l e d s i x deviations and  ranged f r o m  g e n e r a l d i f f e r e n t i a l b e t w e e n r e g u l a r a n d p r e m i u m was  gasoline  gasoline  observed.  l£ to 3£.  5£ p e r g a l l o n ,  The  87  a l t h o u g h t h i s t e n d e d to be s m a l l e r w h e r e d e v i a t i o n s d i d o c c u r .  O b s e r v a t i o n of n o n - b r a n d  s t a t i o n s s h o w e d that t h e i r p r i c e s  f l u c t u a t e d m o r e t h a n the m a j o r s t a t i o n s .  T h e average p r i c e of r e g u l a r  w a s a b o u t 4 2 £ p e r g a l l o n a l t h o u g h i t d i d d r o p t o 40. 9£ i n one i n s t a n c e a n d w e n t a s h i g h a s 44. 9£ i n a n o t h e r .  T h e a v e r a g e p r i c e of p r e m i u m  gasoline  was a b o u t 4 5 £ r a n g i n g f r o m 42. 9£ to 4 7 . 9 °  T h e d i f f e r e n t i a l i n p r i c e between  regular and p r e m i u m gasoline for non-brand  s t a t i o n s a p p e a r s t o be 3£ t o 4£  per gallon.  bonuses,  r  P r i c e - c u t t e r s a l s o use coupons,  merchandise,  etc.  give-aways,  reduced  M e r i t O i l has a s y s t e m of coupons, w h i l e C a l V a n u s e s  a gasoline discount method.  The Econo  stations have a wide range of d i s -  counted m e r c h a n d i s e including gardening supplies, lawn f u r n i t u r e , and recreational  goods.  I n t e r v i e w s w i t h i n d e p e n d e n t d e a l e r s r e v e a l that 70 t o 80 p e r c e n t of t h e i r b u s i n e s s i s f r o m r e p e a t c u s t o m e r s .  Because  o f t h i s , the y e a r l y  c y c l e s of b u s i n e s s f o r independents a n d m a j o r s a r e r e v e r s e d .  The  independents' best month f o r gasoline i s D e c e m b e r when there i s t r a d i t i o n a l l y a l o t of s h o p p i n g a n d l o c a l v i s i t i n g t o be d o n e .  Major companies,  on the  other, h a n d , r e p o r t the s u m m e r m o n t h s o f J u l y a n d A u g u s t a s t h e i r b e s t season.  T h i s s h o w s that t h e y h a v e m a n y one s t o p c u s t o m e r s who a r e  m e r e l y passing through.  As than m a j o r  a rule independent stations have lower m a r k e t i n g c o m p a n y s t a t i o n s ( F i g u r e 7).  expenses  E v e n though t h e i r e x p e n s e s a r e  l o w e r , the i n d e p e n d e n t s m u s t m a i n t a i n a h i g h e r r e q u i r e d m a r k e t i n g  88  INDEPENDENT AND MAJOR COMPANY SERVICE STATION EXPENSES  MAJOR  COMPANY  INDEPENDENT  STATION  STATION  dealer compensation other retail expenses station labor  GALLONAGE  FIGURE  7.  utilities J^real estate delivery ^other wholesale expenses  89 margin. ^  This is true because:  1) independent stations have lower non-  gasoline gross profits; 2) independents have a lower ratio of premium/ regular gasoline sales. they do s e l l .  They also receive less for the premium gasoline  With 40 per cent premium sales at a 3£ differential the  major company will make 1.2 cents/gallon profit while the independent is likely to receive only 30 per cent premium sales at a l ( differential and make .3 cents/gallon profit; 3) because independent stations usually sell gasoline 2£ to 4£ below standard prices they must mak'e up the difference by increased gallonage or lower overhead. In general it can be said that in Vancouver the major companies follow a system of price leadership and do not actively compete through price but use other less direct marketing tactics to attract customers. The non-brand stations, on the other hand, use price as a competitive weapon and sell gasoline for 2£ to 4£ per gallon below the price set by the major f i r m s . Development and Application of Site Rating Instrument To establish a quality rating score for each service station in the study, a site rating instrument very similar to the one developed by Claus was employed. Experience in California suggested that Brick's original system (see Chapter 2) of weighting site variables (which had been designed to accommodate the New Jersey market) might be modified to ^ R e q u i r e d marketing margin is the marketing margin which an individual station must have to recover all costs including charges on real estate.  90  g i v e a m o r e a c c u r a t e p r e d i c t i o n of g a l l o n a g e . ^ r e w e i g h t e d v a r i a b l e s i s s h o w n i n F i g u r e 8.  A new  T h i s new  r a t i n g schedule of s c h e d u l e has  u s e d t o r a t e g a s o l i n e s e r v i c e s t a t i o n s i n C a l i f o r n i a a n d i s the one i n the p r e s e n t s t u d y .  The  been employed  m o d i f i e d r a t i n g s c h e d u l e a l s o h a s the a d d e d  a d v a n t a g e of b e i n g i n w h o l e n u m b e r s r a t h e r t h a n d e c i m a l s , thus f a c i l i t a t i n g rapid field  calculations.  T o t e s t f o r a n y s i g n i f i c a n c e b e t w e e n the two  s y s t e m s of w e i g h t e d  v a r i a b l e s both s c h e d u l e s w e r e u s e d i n r a t i n g the s a m p l e of 23 m a j o r stations.  S i n c e B r i c k ' s o r i g i n a l i n s t r u m e n t was  r a t i n g of m a j o r c o m p a n y s t a t i o n s , i t was c o u l d be o b t a i n e d by e x a m i n i n g  d e v e l o p e d s o l e l y f o r the  f e l t that the b e s t  only m a j o r stations.  The  comparison  B e c a u s e of the n a t u r e  of the d a t a ( w h i c h w i l l be e x p l a i n e d l a t e r i n t h i s c h a p t e r ) a c o r r e l a t i o n a l a n a l y s i s was  company  nonparametric  performed.  m i c r o , m a c r o , and total rating s c o r e s f o r B r i c k ' s  schedule  a n d the r e w e i g h t e d s c h e d u l e , as w e l l as the g a l l o n a g e s f o r a l l s t a t i o n s , were ranked in descending order.  A  g a l l o n a g e a n d s i t e r a t i n g s c o r e s was  correlational analysis  between  then p e r f o r m e d u s i n g Spearman's  r a n k c o r r e l a t i o n c o e f f i c i e n t as d e f i n e d b y the s t a t i s t i c :  N  r  s  I  = 1 - 6  di  2  i = l  N -N 3  ^ F o r importance  a f u l l e r d i s c u s s i o n of r e g i o n a l d i f f e r e n c e s i n the r e l a t i v e  of s i t e r a t i n g v a r i a b l e s a n d t h e i r w e i g h t i n g s s e e C l a u s  (1969),  Name:  MICRO-LOCATIONAL ASPECTS O F SERVICE  Address:  Station D e s i g n a n d F a c i l i t i e s  10  L a y o u t ( S i z e a n d Shape)  10  Gallonage:  P l a c e m e n t a s to T r a f f i c  Flow  Linear:  Visibility G r a d e s of A r t e r i e s a n d S t r e e t s  8 8 16  20 10 5  STATIONS 6 6  12  8  6  4  3  4 4  2 2  8  4  4 2  2 1  Zone of C o n f l u x : MACRO-LOCATIONAL ASPECTS  OF SERVICE  STATIONS  Rating: Local o r Neighborhood 10  Threshold  2  8  6  4  4  3  2  1  8  6  4  2  4  3  2  1  8  6  4  2  4  3  2  1  Incomes i n and/or T y p e of I L L U S T R A T I O N O F SITE  Area  5  A r e a Growth Characteristics Location  10  a s to D o m i n a n t 5  Threshold Traffic Threshold Potential Stations ' D e n s i t y  Ratio  10 5 100  80  COMMENTS:  F I G U R E 8: P e r f o r m a n c e R a t i n g G u i d e : Service Station a n d S e r v i c e Station Site  60  40  20  92 where  r  s  di N  = correlation coefficient = the s q u a r e d d i f f e r e n c e b e t w e e n p a i r e d = the n u m b e r of  ranks  observations  T a b l e 5 g i v e s the r e s u l t s of the a b o v e a n a l y s i s . has  The  r  s  statistic  not b e e n c o r r e c t e d f o r t i e s i n t h i s c a s e b e c a u s e e q u a l n u m b e r s  e q u a l m a g n i t u d e s of t i e s e x i s t e d i n both s e t s of d a t a a n d not e f f e c t a c o m p a r i s o n of the two  would  therefore  schedules.  TABLE  5  Scales  Brick's Schedule  Micro  . 72 '  . 70  Macro  . 08  . 07  Total  .81  . 83  The  and  Reweighted Schedule  c o r r e l a t i o n a l a n a l y s i s r e v e a l s that t h e r e i s l i t t l e d i f f e r e n c e  b e t w e e n the two  site r a t i n g i n s t r u m e n t s .  It c a n be  c o n c l u d e d t h e n , that i n  t h i s i n s t a n c e , the r e w e i g h t e d s c h e d u l e i s at l e a s t as e f f e c t i v e as  Brick's  o r i g i n a l s y s t e m of w e i g h t e d v a r i a b l e s .  B e c a u s e of the l i m i t e d s a m p l e s i z e (23) a n d r e s u l t s , i t w o u l d be u n f a i r to s a y t h a t e i t h e r one was  the  inconclusive  of the r a t i n g i n s t r u m e n t s  s u p e r i o r i n the V a n c o u v e r m a r k e t .  Data Collection The  b a s i c d a t a u s e d i n the a n a l y s i s c o n s i s t e d of:  figures for each station during each station.  1969,  and  2)  1)  gallonage  quality rating scores  for  As  was  e x p l a i n e d e a r l i e r the g a l l o n a g e f i g u r e s f o r the m a j o r  company stations were obtained d i r e c t l y f r o m G a l l o n a g e d a t a f o r n o n - b r a n d s t a t i o n s was  the c o m p a n i e s  themselves.  r e c e i v e d f r o m a n u m b e r of  other s o u r c e s .  Q u a l i t y r a t i n g s c o r e s w e r e o b t a i n e d by r a t i n g e a c h s t a t i o n i n the s t u d y u s i n g the i n s t r u m e n t as s h o w n i n F i g u r e 8.  A  u s e and a p p l i c a t i o n of this site r a t i n g g u i d e , p l u s a  f u l l d e s c r i p t i o n of the supplementary  q u e s t i o n n a i r e , c a n be f o u n d i n C l a u s a n d R o t h w e l l (1970). stemmed from  a p i l o t s t u d y of a n u m b e r of s e r v i c e s t a t i o n s of k n o w n  g a l l o n a g e c o n d u c t e d i n the w i n t e r of 1969-70 by D r . author.  The  This publication  purpose  of t h i s s t u d y was  R.  J . C l a u s a n d the  to b e c o m e m o r e f a m i l i a r w i t h the  g a s o l i n e s e r v i c e s t a t i o n i n d u s t r y of V a n c o u v e r a n d to t r a i n the a u t h o r i n the p r o p e r u s e of the s i t e r a t i n g i n s t r u m e n t .  Extended  discussions  were  h e l d on the e f f e c t s that e a c h l o c a t i o n a l v a r i a b l e h a d on the t o t a l r a t i n g s c o r e . The  e v e n t u a l o u t c o m e of the t r a i n i n g a n d s t u d y r e s u l t e d i n the d e v e l o p m e n t  of the q u a l i t y r a t i n g s c h e d u l e u s e d i n t h i s t h e s i s .  W h e n the p r a c t i c e r a t i n g s i n the p i l o t s t u d y w e r e Dr.  completed,  C l a u s a n d the a u t h o r i n d e p e n d e n t l y r a t e d the s e r v i c e s t a t i o n s  f o r the p r e s e n t s t u d y .  T o e s t a b l i s h s o m e m e a s u r e of i n t e r - r a t e r r e l i a b i l i t y ,  S p e a r m a n r a n k c o r r e l a t i o n s w e r e r u n b e t w e e n the two m a c r o , and total s c o r e s .  The  high r  s  s e t s of m i c r o ,  T a b l e 6 r e p o r t s the r e s u l t s .  v a l u e s of .94,  .84,  and  .94 f o r c o r r e l a t i o n s b e t w e e n  i d e n t i c a l m e a s u r e s w o u l d s e e m to i n d i c a t e a f a i r l y h i g h d e g r e e rater  reliability.  selected  of i n t e r -  94  TABLE  6  S p e a r m a n Rank C o r r e l a t i o n s Between Independently  Rated  M i c r o , M a c r o , and T o t a l S c o r e s f o r a l l Stations  R a t e r No.  R a t e r No.  2  1 Total  Macro  Micro Micro  .94  .20  . 84  Macro  .21  .84  .43  Total  .81  .46  .94 •  The  T a b l e a l s o i n d i c a t e s that a s t r o n g r e l a t i o n s h i p e x i s t s b e t w e e n  m i c r o s u b s c o r e s a n d t o t a l s c o r e s f o r both r a t e r s .  Statistical Procedures A f t e r e x a m i n i n g the r a w  d a t a i t was  d e c i d e d that n o n p a r a m e t r i c  t e s t s w o u l d be u s e d i n the s t a t i s t i c a l a n a l y s i s . of r e a s o n s .  T h i s was  done for' a n u m b e r  Difficulties in p a r a m e t r i c analysis would have a r i s e n f r o m  f a c t that one g r o u p of s t a t i o n s , i . e . the m a j o r s ,  the  c o m p r i s e d a sample while  the o t h e r g r o u p , the i n d e p e n d e n t s , m a d e up the e n t i r e p o p u l a t i o n . B o t h the s a m p l e of m a j o r s t a t i o n s ( N = 23) a n d the p o p u l a t i o n of i n d e p e n d e n t s ( N = 20) w e r e t o o s m a l l to m e e t the p o w e r - e f f i c i e n c y r e q u i r e m e n t s of m o s t parametric tests.  V a r i a b l e s i n v o l v e d i n p a r a m e t r i c t e s t s m u s t a l s o be  m e a s u r e d i n an i n t e r v a l s c a l e . conclusively demonstrated ment.  T h i s r e q u i r e m e n t , h o w e v e r , c o u l d not be  f o r the v a r i a b l e s c o r e s i n the s i t e r a t i n g  instru-  A d d i t i o n a l to t h i s i s the f a c t that the s a m p l i n g p r o c e d u r e f o r the  s e l e c t i o n of m a j o r c o m p a n y s t a t i o n s was this and because  not e n t i r e l y r a n d o m .  o f the s m a l l s a m p l e s i z e , i t was  B e c a u s e of  s u s p e c t e d that the d a t a  was  not n o r m a l l y d i s t r i b u t e d , a n o t h e r r e q u i r e m e n t  of p a r a m e t r i c  tests.  T o d i s c o v e r the s h a p e of the d a t a d i s t r i b u t i o n , c h i s q u a r e g o o d n e s s - o f - f i t t e s t s w e r e r u n on the d a t a to t e s t f o r n o r m a l , b i n o m i a l , p o i s s o n , negative b i n o m i a l distributions. the m i c r o ,  The  and  c h i s q u a r e t e s t s w e r e a p p l i e d to  m a c r o , a n d t o t a l s c o r e s p l u s the g a l l o n a g e f i g u r e s f o r b o t h the  m a j o r and independent  stations.  R e s u l t s r e v e a l e d that the d a t a f a i l e d the  test f o r n o r m a l i t y i n e v e r y i n s t a n c e and only o c c a s i o n a l l y d i d i t fit other distributions.  B e c a u s e of the data's f a i l u r e t o c o n s i s t e n t l y f i t a n y  t i o n a m e t h o d of d a t a t r a n s f o r m a t i o n was  a l s o r u l e d out.  S m i r n o v o n e - s a m p l e g o o d n e s s - o f - f i t t e s t was data n o r m a l i t y .  The  The  distribu-  Kolmogorov-  also c o n s i d e r e d f o r testing  K o l m o g o r o v - S m i r n o v test, however, is even m o r e  p o w e r f u l i n d i s c r i m i n a t i n g d i s t r i b u t i o n s t h a n the c h i s q u a r e t e s t ; thus i f the d a t a f a i l e d the l a t t e r i t w o u l d by d e f i n i t i o n a l s o f a i l the  The  conclusion reached after examination  nonparametric  s t a t i s t i c s s h o u l d be u s e d .  former.  of the d a t a , was  Unlike parametric tests,  that non-  p a r a m e t r i c s do not s p e c i f y c o n d i t i o n s a b o u t the p a r a m e t e r s of the p o p u l a t i o n from  w h i c h the s a m p l e was  drawn.  the a d v a n t a g e s a n d d i s a d v a n t a g e s advantages are:  1)  S i e g e l (1956, pp.  of n o n p a r a m e t r i c  " P r o b a b i l i t y statements  32-33) o u t l i n e s  statistics.  obtained f r o m  both  S o m e of the  most nonpara-  m e t r i c s t a t i s t i c a l t e s t s a r e e x a c t p r o b a b i l i t i e s ( e x c e p t i n the c a s e of l a r g e samples, where excellent approximations  ^Although  t h e r e was  a r e a v a i l a b l e ) , r e g a r d l e s s of the  i n i t i a l h e s i t a n c y about e m p l o y i n g  a chi  square  t e s t , b e c a u s e of the s m a l l n e s s of the s a m p l e s , c o n s u l t a t i o n w i t h  Dr.  K o z a k of the U .  A.  t e s t was  B.  C.  D e p a r t m e n t of F o r e s t r y r e v e a l e d that the  i n d e e d p o w e r f u l e n o u g h to p r o p e r l y d i s c r i m i n a t e d i s t r i b u t i o n s  e v e n at the p r e s e n t s a m p l e  size.  96  s h a p e o f the p o p u l a t i o n d i s t r i b u t i o n f r o m w h i c h the r a n d o m s a m p l e w a s d r a w n " (p. 32); 2) F o r v e r y s m a l l s a m p l e s i z e s t h e r e i s no a l t e r n a t i v e to u s i n g n o n p a r a m e t r i c s t a t i s t i c a l t e s t s u n l e s s the p o p u l a t i o n d i s t r i b u t i o n i s known exactly;  3) N o n p a r a m e t r i c t e s t s a r e a v a i l a b l e f o r t r e a t i n g  samples  made up of o b s e r v a t i o n s f r o m s e v e r a l different populations. T h e a s s u m p t i o n s of p a r a m e t r i c t e s t s c a n n o t h a n d l e s u c h d a t a .  4) D a t a that i s b y n a t u r e n o n -  i n t e r v a l , o r d i n a l , o r n o m i n a l c a n be h a n d l e d b y n o n p a r a m e t r i c tests.  statistical  M o s t n o n p a r a m e t r i c tests r e q u i r e only o r d i n a l o r r a n k e d data.  S o m e o f the d i s a d v a n t a g e s a r e :  1) I n c o m p a r i s o n t o p a r a m e t r i c  t e s t s that m e e t a l l the d a t a a s s u m p t i o n s , n o n p a r a m e t r i c t e s t s a r e w a s t e f u l of d a t a .  T h a t i s t o s a y , the p o w e r - e f f i c i e n c y o f n o n p a r a m e t r i c t e s t s i s n o t  as h i g h as f o r p a r a m e t r i c o n e s .  A s S i e g e l (1956) r e c o r d s , h o w e v e r , t h i s  i s n o t a l w a y s the c a s e ; i n f a c t , c e r t a i n n o n p a r a m e t r i c t e s t s c a n be m o r e p o w e r f u l than p a r a m e t r i c t e s t s , e.g. M a n n - W h i t n e y U  test v e r s u s p a r a -  m e t r i c t t e s t (p. 126); 2) N o n o n p a r a m e t r i c s t a t i s t i c a l m e t h o d i s a v a i l a b l e for testing interactions  i n the a n a l y s i s  tions a r e made c o n c e r n i n g additivity. the p r e s e n t e x p e r i m e n t a s a n a l y s i s  of v a r i a n c e , u n l e s s s p e c i a l a s s u m p T h i s a s p e c t i s of n o c o n s e q u e n c e i n  of v a r i a n c e tests a r e not r e q u i r e d to  p r o c e s s the d a t a .  T h e n o n p a r a m e t r i c s t a t i s t i c a l t e s t u s e d m o s t o f t e n i n the s t u d y i s Spearman's rank correlation coefficient, r  s  . It i s u s e d h e r e a s a n a l t e r n a -  tive test to the P e a r s o n p r o d u c t m o m e n t c o r r e l a t i o n c o e f f i c i e n t , r . A s was mentioned statistic:  e a r l i e r Spearman's r  s  u s e s r a n k e d d a t a a n d i s d e f i n e d b y the  97  =  r  5  1-  6£d;2  N  w here  r  = correlation  q  = squared  N  = n u m b e r  F o r  rank  which  tion  of ties  206).  of  between  observations,  large,  not  been  each  rank  assigned  their  had  effect  p r o p o r t i o n of ties  be  ranks  observations  is  m a y  N  difference  have  the  -  coefficient  would  W h e n  f o r m u l a  tied  3  on  is  is  no  r  g  assigned  ties  is  the  average  o c c u r r e d .  negligible"  large  however,  _  s  "If  the  (Siegel,  the  of  the  p r o p o r -  1956,  following  p.  correction  used:  I *  2  +  S  2 y z x  y  2  i y  2  2  Z f l r  ;  where  7,x = N - N 2  I L  -  3  12 and  where  _  the  coefficient  study  of  the  the  was  to  site  value.  influence  the  of  observations  r  s  tied  of  effect  tied  ranks  In a l l the  m a x i m u m  reduce  t - t 12  of the  rating  N -N  Y.T,  -  3  "  n o r m a l effect  application  =  2  12  V  3  = n u m b e r  The  ly  3  T= t  ,  of  .02.  statistical  at  a  ranks  is  to  f o r m u l a  S p e a r m a n  tied  instrument.  by  tied  In no  inflate  tend  o c c u r r e d  ultimate  instance  significance  rank  to  correlations  ranks  The  will  given  of the  that  of  value  reduce  i n the  effect  d i d the  the  the  the  were  tied  r  subs  rank  for  values.  s  so  that  correlation  done  m a c r o  correction  correlation  of  tied  for  this  cores  f o r m u l a  ranks  98  The  p o w e r - e f f i c i e n c y of the S p e a r m a n r a n k c o r r e l a t i o n w h e n  c o m p a r e d to the m o s t p o w e r f u l p a r a m e t r i c c o r r e l a t i o n , the P e a r s o n _r, i s a b o u t 91 p e r c e n t ( S i e g e l , 1956,  p.  213).  Kendall's rank c o r r e l a t i o n coefficient, as a r e p l a c e m e n t f o r the P e a r s o n r . A l t h o u g h  r (tau), was  also considered  r i s as p o w e r f u l as r  s  (both  h a v i n g an e f f i c i e n c y of 91 p e r c e n t ) , the K e n d a l l m e t h o d i s c o m p u t a t i o n a l l y m o r e t i m e c o n s u m i n g , e s p e c i a l l y f o r N>10,  than Spearman's  statistic.  E v e n t h o u g h both m e t h o d s a r e e q u a l l y as p o w e r f u l i n r e j e c t i n g H ,  r  Q  r  s  and  have d i f f e r e n t u n d e r l y i n g s c a l e s and n u m e r i c a l l y they a r e not d i r e c t l y  c o m p a r a b l e to e a c h o t h e r . o n l y c o n f u s e the r e a d e r who of t h e s e two  T o u s e t h e m b o t h i n the s a m e a n a l y s i s w o u l d was  u n a c c u s t o m e d to the c o m p a r a b l e  scaling  statistics.  G u i l f o r d (1965, p. 307) i n a d i s c u s s i o n of c o r r e l a t i o n s t a t i s t i c s s a y s that r average  s  i s n u m e r i c a l l y c l o s e l y e q u i v a l e n t to the P e a r s o n _r.  On  the  r i s s l i g h t l y g r e a t e r t h a n r , the m a x i m u m d i f f e r e n c e b e i n g s  a p p r o x i m a t e l y .02 w h e n b o t h a r e n e a r .50.  Kendall's  r , however, deviates  m u c h m o r e a n d c a n n o t be c o n s i d e r e d d i r e c t l y c o m p a r a b l e to the p r o d u c t m o m e n t c o r r e l a t i o n c o e f f i c i e n t o r the r a n k c o r r e l a t i o n c o e f f i c i e n t .  D e s c r i p t i o n of D a t a A h i s t o g r a m of y e a r l y s t a t i o n g a l l o n a g e s f o r b o t h the m a j o r s t a t i o n s a n d the p r i c e - c u t t e r s i s s h o w n i n F i g u r e 9.  Frequencies were  c a l c u l a t e d f o r i n t e r v a l w i d t h s of 1 0 0 , 0 0 0 g a l l o n s .  A l t h o u g h 83 p e r c e n t of the m a j o r s t a t i o n s a n d 45 p e r c e n t o f the  Station Yearly  Gallonages  (000's o f g a l . )  FIGURE  9.  H I S T O G R A M OF YEARLY G A L L O N A G E S FOR  ALL  STATIONS  100  independent  gallonages  the  stations  is  findings  total  the  its  average  point  m a c r o  general,  higher  rating  ence  m i c r o  between  Chapter  distribution, of  representation  confirms  both  10  a  This  ratings  groups  shows  by  full  the  m e a n  stations.  11  points  difference  the  of m a r k e t e r s  is  It  m o r e  company  for  1.3  only  also  m a c r o ,  cap. b e  seen  in total  directly  major  accounted  m i c r o ,  were  that  score  attributable  stations.  points  of  and  The  the  than  tQ  the  average  eleven  not  m a j o r .  it  can  both  time,  be  o n the  groups  that  p e r f o r m a n c e  layout,  m i c r o  scale  m a j o r  than  variables  the  are  because  visibility,  etc.,  of  It  INSV  be  the  well  m e a s u r e  then,  qualitative  differences  i . e .  to  gallonage,  The  while  would  designed  of  station.  stations  independents,  equal.  In t e r m s  quality  occurs  company  relatively  station.  a high  design,  the  r e m a i n e d  of a  stations  that  m i c r o  the  indicates  service  seen  differ-  in such  features  a  things  (see  2),  In  the  for  rating  facilities,  does  visual  and m a j o r  s c o r e d  received  ratings  this  gallonage  high  in F i g u r e  counterpart.  in m a c r o  r e c a l l at  the  for  independent  ratings  This  the  chapter.  scores  station  300,000 gallons,  differential.  received  4),  the  m a j o r  m i c r o  In  as  graph  independent  difference  to  bar  than  n o r m a l .  previous  rating  for  less  being  site  The  scores  higher  f r o m  i n the  The  plotted.  far  p u m p  the  m e a n  average  case  a  loss  of the  of  independents,  gallonage.  price-cutter  pumps  A s  a  lack  it has  twice  as  of facilities  already  m u c h  been  gasoline  and  service  shown  as  the  (Table  average  FIGURE  10.  SITE R A T I N G  SCORES FOR M A J O R A N D I N D E P E N D E N T  STATIONS  102  T o d i s c o v e r m o r e a b o u t the n a t u r e o f the r a w d a t a a s e r i e s o f Mann-Whitney U t e s t s ( M - W U tests) were p e r f o r m e d .  T h e M-W  U test m a y  be u s e d to t e s t w h e t h e r t w o i n d e p e n d e n t g r o u p s h a v e b e e n d r a w n f r o m t h e same population,  " T h i s i s one of the m o s t p o w e r f u l o f the n o n p a r a m e t r i c  t e s t s , a n d i s the m o s t u s e f u l a l t e r n a t i v e t o the p a r a m e t r i c t_ t e s t " ( S i e g e l , 1956,  p. 1 1 6 ) .  T h e u s u a l n u l l h y p o t h e s i s i s that A a n d B h a v e the s a m e  distribution, i . e . H Q : £ A  =  £ B ; w h i l e the a l t e r n a t i v e h y p o t h e s i s i s  that one g r o u p i s s t o c h a s t i c a l l y l a r g e r t h a n the o t h e r , i . e . H ^ :  £A >  S B .  The  M-W  U t e s t i s d e f i n e d b y the s t a t i s t i c :  U = n n+ (  n,( n + l ) 2  - R,  2 where  n j = n u m b e r o f o b s e r v a t i o n s f o r the s m a l l e r n £ = n u m b e r o f o b s e r v a t i o n s f o r the l a r g e r  group group  K\ = s u m o f r a n k s a s s i g n e d t o g r o u p w h o s e s a m p l e s i z e i s n ^ For n£  the M-W  U t e s t , the g e n e r a l r u l e i s that n^ <  xi^* W h e n  > 2 0 , w h i c h i s the c a s e i n t h i s e x p e r i m e n t , the s a m p l i n g d i s t r i b u t i o n  of U r a p i d l y a p p r o a c h e s the n o r m a l d i s t r i b u t i o n w i t h : Mean =  nu  =  —•—— 2  and = <r =  Standard deviation  The  n, n ( n , + n + I) 2  t e s t f o r s i g n i f i c a n c e i n the M-W  by the s t a t i s t i c .  ' When  0  2  U t e s t m a y be d e t e r m i n e d  .. z  =  u  -" M  a. = . 0 5 i s s e t as the s i g n i f i c a n c e l e v e l , H Q m u s t be r e j e c t e d i f  103  v a l u e s of  Z  a r e s o e x t r e m e that t h e i r a s s o c i a t e d p r o b a b i l i t i e s a r e e q u a l  to o r l e s s t h a n .05.  The  M-W  for tied ranks.  U t e s t , l i k e the S p e a r m a n s t a t i s t i c , h a s a c o r r e c t i o n  A l t h o u g h the m e a n r e m a i n s the s a m e , i . e . :  12 the s t a n d a r d d e v i a t i o n a s s u m e s the s t a t i s t i c , //  where  n  i  n  2  \  N  -~  3  N  2  - IT  N = t o t a l o b s e r v a t i o n s i n the two g r o u p s (N = n^ + n2) IT  =  ( t - t) 3  12 t = number  of o b s e r v a t i o n s t i e d a t a g i v e n r a n k  E v e n w h e n the p r o p o r t i o n of t i e d r a n k s i s h i g h , e . g . 90 p e r c e n t , the e f f e c t of t i e s i s n e g l i g i b l e .  S i e g e l (1956) r e c o m m e n d s  that "one s h o u l d  c o r r e c t f o r t i e s o n l y i f the p r o p o r t i o n of t i e s i s q u i t e l a r g e , a n d i f s o m e o f the t's a r e l a r g e " (p. 126). B o t h the t i e d m e t h o d a n d the n o n - t i e d m e t h o d w e r e u s e d i n a n a l y z i n g the d a t a i n t h i s s t u d y . d i f f e r e d b y n o m o r e t h a n .004.  The resulting  probabilities  T h e f o l l o w i n g r e p o r t e d v a l u e s a r e f o r the  tied method.  The  M a n n - W h i t n e y U t e s t ' s p o w e r - e f f i c i e n c y as c o m p a r e d to the  3/ m o s t p o w e r f u l p a r a m e t r i c t e s t of t h i s t y p e , the t_test, a p p r o a c h 95.5 p e r c e n t as N i n c r e a s e s .  F o r m o d e r a t e s i z e s a m p l e s the p o w e r -  e f f i c i e n c y i s u s u a l l y 95 p e r c e n t . The  M-W  /TT  U t e s t was a p p l i e d to the d a t a f o r the m a j o r a n d  =  104  i n d e p e n d e n t s t a t i o n s t o s e e i f the m i c r o ,  m a c r o , and total s c o r e s as w e l l  as the g a l l o n a g e f i g u r e s w e r e d r a w n f r o m the s a m e p o p u l a t i o n s . A l t e r n a t i v e h y p o t h e s e s w e r e p r o p o s e d f o r e a c h o f the f o u r t e s t s o n the b a s i s o f a p r i o r i understanding  The  o f the d a t a d i s t r i b u t i o n s .  f i r s t t e s t w a s p e r f o r m e d o n the y e a r l y g a l l o n a g e f i g u r e s .  The  n u l l h y p o t h e s i s w a s that the g a l l o n a g e d i s t r i b u t i o n f o r the m a j o r s e q u a l l e d (HQ:  the g a l l o n a g e d i s t r i b u t i o n f o r the i n d e p e n d e n t s  £ M =  £ I).  The  a l t e r n a t i v e h y p o t h e s i s w a s t h a t the g a l l o n a g e d i s t r i b u t i o n f o r t h e m a j o r (H^:  s t a t i o n s w a s s t o c h a s t i c a l l y s m a l l e r t h a n the i n d e p e n d e n t s F o r 9 p e r c e n t t i e d r a n k s , the  < + 4.942.  Z  statistic y i e l d e d a value of  T h i s r e p r e s e n t s a p r o b a b i l i t y of . 0 0 0 3 ,  rejected.  £ M  t h e r e f o r e H Q m u s t be  It c a n be c o n c l u d e d t h e n , that the two g r o u p s o f g a l l o n a g e  w e r e n o t d r a w n f r o m the s a m e p o p u l a t i o n a n d that i n d e p e n d e n t s '  figures  gallonages  a r e s t o c h a s t i c a l l y l a r g e r t h a n the m a j o r s ' g a l l o n a g e s .  It s h o u l d be n o t e d t h a t the i n i t i a l M-W for  Z  value i n this test i s p o s i t i v e .  f o r m u l a f o r U , the v a l u e of R ,  r e p r e s e n t s the s u m o f the r a n k s  the s m a l l e r s a m p l e , i . e . the i n d e p e n d e n t s .  in descending  In t h e  S i n c e the d a t a i s r a n k e d  order, s m a l l e r R j values represent proportionately higher  gallonage figures.  B e c a u s e R j i s a m i n u s v a l u e i n the U f o r m u l a ,  v a l u e s o f R^ w i l l g i v e l a r g e r v a l u e s o f U . f i g u r e s f o r the i n d e p e n d e n t ' s  If i t h a p p e n e d that the g a l l o n a g e  w e r e g e n e r a l l y l o w e r t h a n the m a j o r s , R j  w o u l d be l a r g e r a n d w o u l d p r o d u c e a s m a l l e r v a l u e of U . v a l u e o f U w o u l d i n t u r n be s m a l l e r t h a n the m e a n , in a negative value f o r  Z  smaller  . It c a n be s e e n ,  n  u  This  smaller  , and would r e s u l t  then, that a p o s i t i v e  Z  105  v a l u e i n d i c a t e s the  The  J; I i s s t o c h a s t i c a l l y l a r g e r t h a n  £ M.  s a m e t e s t w a s p e r f o r m e d on the t o t a l s i t e r a t i n g s c o r e s f o r the  two g r o u p s of m a r k e t e r s .  T h i s t i m e the h y p o t h e s e s w e r e f o r m u l a t e d as  follows: H :  £M  =  £1  Hi:  £M  >  £1  0  W i t h 28 p e r c e n t t i e s the r e s u l t s p r o d u c e d a a n d a n a s s o c i a t e d p r o b a b i l i t y of .0392.  2  v a l u e of -1.756  A g a i n the n u l l h y p o t h e s i s  was  r e j e c t e d w i t h the c o n c l u s i o n t h a t the t w o d i s t r i b u t i o n s w e r e n o t d r a w n f r o m the s a m e p o p u l a t i o n a n d t h a t the t o t a l s c o r e s f o r the m a j o r  company  s t a t i o n s w e r e s t o c h a s t i c a l l y h i g h e r t h a n the t o t a l s c o r e s f o r i n d e p e n d e n t stations.  The  M-W  U t e s t w a s a l s o a p p l i e d to the m a c r o r a t i n g s to t e s t the  h y p o t h e s e s that: H :  £ M =  H:  £ M  0  1  For  *I >  £1  16 p e r c e n t t i e d r a n k s , the t e s t p r o v i d e d a  -.0497 a n d a n a s s o c i a t e d p r o b a b i l i t y of .4801.  Z  value of  In t h i s c a s e we m u s t  accept  the n u l l h y p o t h e s i s that the two d i s t r i b u t i o n s w e r e d r a w n f r o m the s a m e population.  Although  the  Z  v a l u e s f o r the m a j o r c o m p a n y  The the f o l l o w i n g  f i n a l M-W  value i s negative, indicating h i g h e r  s t a t i o n s , this d i f f e r e n c e i s not s i g n i f i c a n t .  U t e s t was p e r f o r m e d on the m i c r o  hypotheses:  macro  r a t i n g s to t e s t  106  H :  =  KM  0  Hi:  For  II  >  $1  21 p e r c e n t t i e d r a n k s , the t e s t p r o d u c e d a  -2.057 a n d a n a s s o c i a t e d p r o b a b i l i t y o f .0195.  Z  v a l u e of  Since H g is rejected, i t  m u s t be c o n c l u d e d that the two d i s t r i b u t i o n s w e r e n o t d r a w n f r o m the s a m e p o p u l a t i o n a n d that the m i c r o r a t i n g s  f o r the m a j o r s t a t i o n s  c a l l y l a r g e r t h a n f o r the i n d e p e n d e n t  stations.  The  are stochasti-  r a n k s u m t e s t ( H o e l , 1967, p . 252) i s v e r y s i m i l a r t o the  M a n n - W h i t n e y U t e s t e x c e p t f o r the f a c t that the  sum isused directly  i n the c a l c u l a t i o n o f the t e s t of s i g n i f i c a n c e : Z  =  R  i~  w h e r e the s t a n d a r d d e v i a t i o n  _  M  R  i s the s a m e a s the U t e s t ,  . / n, n ( n , + n  f  2  2  +1  -J2  but w h e r e the m e a n s v a r i e s s l i g h t l y ,  2 W h e n the r a n k s u m t e s t w a s a p p l i e d differences  to d i s c o v e r i f t h e r e w e r e any  b e t w e e n two g r o u p s of d a t a , the r e s u l t s w e r e e x a c t l y t h e s a m e  as the U t e s t e x c e p t that t h e y w e r e a l l s i g n i f i c a n t a t the .01 l e v e l , ( T a b l e 7).  F r o m the r e s u l t s o f the r a n k s u m t e s t a n d the M a n n - W h i t n e y U t e s t , i t c a n be s e e n that the m i c r o s c o r e s , the t o t a l s c o r e s , a n d the gallonage figures  o f the m a j o r a n d i n d e p e n d e n t s t a t i o n s  w e r e not d r a w n  107  TABLE V a l u e s of Z  7  A s s o c i a t e d P r o b a b i l i t y , a n d R e j e c t i o n of  H Q f o r R a n k S u m T e s t A p p l i e d to M i c r o , M a c r o ,  Total,  and G a l l o n a g e Data  Z  Data Gallonage  Reject H Q  Probability  2. 751  . 003  Yes  Total  -3.944  .0005  Yes  Macro  -2.141  .0162  No  Micro  -4.248  .00003  Yes  f r o m the s a m e p o p u l a t i o n .  The macro scores  t  h o w e v e r , do c o m e f r o m  the s a m e p o p u l a t i o n .  Because  the i n d e p e n d e n t s t a t i o n s o p e r a t e u n d e r d i f f e r e n t  r e s t r a i n t s t h a n do the m a j o r  c o m p a n y s t a t i o n s , i t w a s a n t i c i p a t e d that t h e i r  g a l l o n a g e f i g u r e s a r e s t o c h a s t i c a l l y l a r g e r t h a n the a v e r a g e m a j o r station.  economic  company  A s was m e n t i o n e d p r e v i o u s l y , lower s e l l i n g p r i c e s , fewer T B A  s a l e s , a n d l i t t l e b a c k r o o m w o r k f o r c e s the i n d e p e n d e n t s t a t i o n s to p u m p m o r e g a s o l i n e j u s t to r e m a i n i n b u s i n e s s .  It i s to be e x p e c t e d t h e n , that  the g a l l o n a g e f i g u r e s f o r the t w o g r o u p s of m a r k e t e r s b e l o n g t o t w o separate populations.  As  w a s a n t i c i p a t e d , the m i c r o s c o r e s f o r the m a j o r s t a t i o n s w e r e  s t o c h a s t i c a l l y h i g h e r t h a n f o r the i n d e p e n d e n t s t a t i o n s . b e c a u s e the m a j o r  This occurs  c o m p a n y stations c o n c e n t r a t e on a c c e s s i b i l i t y ,  con-  v e n i e n c e , a n d s e r v i c e i n o r d e r to a t t r a c t t h e i r c u s t o m e r s .  T h e independent  d e a l e r , o n the o t h e r h a n d , u s e s p r i c e t o a t t r a c t h i s m a r k e t  segment and  108  t e n d s to d i s r e g a r d the f u l l u s e of m i c r o  facilities.  The  o u t c o m e of t h i s i s  that the m a j o r c o m p a n y s t a t i o n s r e c e i v e m u c h h i g h e r m i c r o do the i n d e p e n d e n t s .  The  f a c t t h a t the m i c r o  r a t i n g s than  r a t i n g s f o r the two  g r o u p s of  m a r k e t e r s c o m e f r o m d i f f e r e n t p o p u l a t i o n s w o u l d s e e m to i n d i c a t e t h a t the quality requirements different c r i t e r i a .  f o r the m a j o r s a n d i n d e p e n d e n t s  s h o u l d be j u d g e d  by  T h i s s u b j e c t w i l l be b r o a c h e d m o r e f u l l y l a t e r i n t h i s  chapter.  In g e n e r a l , the t o t a l s c o r e s f o l l o w the s a m e p a t t e r n as the scores.  T h i s is expected  the m i c r o  scores.  The  to l o w e r the v a l u e of the  micro  s i n c e the t o t a l s c o r e s a r e p a r t i a l l y m a d e up  e f f e c t of the m a c r o s u b t o t a l on the t o t a l s c o r e Z  statistic only slightly.  d i d not h a v e a m o r e p r o n o u n c e d m e d i a t i n g b e c a u s e t h e i r v a r i a n c e was  relatively  The  of was  m a c r o subs c o r e s  i n f l u e n c e on the t o t a l s c o r e s  constant.  A l t h o u g h the m a c r o s u b t o t a l s f o r the m a j o r s t a t i o n s w e r e h i g h e r t h a n f o r the i n d e p e n d e n t s t a t i o n s , t h e d i f f e r e n c e was  slightly  not s i g n i f i c a n t .  It c a n be c o n c l u d e d t h e n , that a l l the s t a t i o n s i n the s t u d y w e r e l o c a t e d i n roughly s i m i l a r socio-economic  a r e a s of the C i t y of V a n c o u v e r .  I n t e r n a l C o n s i s t e n c y of S i t e R a t i n g  Schedule  T o m e a s u r e the i n t e r n a l c o n s i s t e n c y of the e l e v e n i t e m s u s e d i n 13 the s i t e r a t i n g s c h e d u l e C r o n b a c h ' s (1951) a l p h a was  computed.  Alpha  i s d e f i n e d by the s t a t i s t i c :  F o r C r o n b a c h ' s a l p h a a p p l i e d to B r i c k ' s o r i g i n a l w e i g h t i n g s 1969, p. 47. i : S  Claus,  see  109  where  n = n u m b e r of p a r t s ( i n t h i s c a s e the n u m b e r of i t e m s  i n the s c a l e )  V£ = v a r i a n c e of one i t e m of a t e s t vj. = v a r i a n c e of t o t a l s c o r e  The  coefficient  a  g i v e s a l o w e r b o u n d on the r e l i a b i l i t y of a  composite test having p a r a l l e l components. e a c h s u b t e s t of a c o m p o s i t e t e s t .  The  a l p h a t e s t c a n be u s e d  T h i s m e t h o d i s j u s t i f i e d w h e n the  w i t h i n e a c h s c a l e h a v e b e e n s e l e c t e d to m e a s u r e the s a m e t h i n g . the c a s e f o r the m i c r o a n d m a c r o s u b t e s t s o f the q u a l i t y r a t i n g The  five items  i n the m i c r o s u b t e s t a r e d e s i g n e d  on  items  Such is  schedule.  to m e a s u r e s i t e q u a l i t y  i n t e r m s of g a l l o n a g e p e r f o r m a n c e a n d the s i x i t e m s  i n the m a c r o s u b t e s t  a r e c o n c e r n e d w i t h e c o n o m i c l i f e as a m e a s u r e of p e r f o r m a n c e .  A p p l i c a t i o n of C r o n b a c h ' s a l p h a y i e l d e d a v a l u e of .89 f o r the m i c r o s u b t o t a l a n d a v l u e of .63 f o r the m a c r o s u b t o t a l . a  The  coefficient  f o r the m i c r o s c o r e s i s c o n s i d e r e d to be v e r y h i g h a n d i n d i c a t e s that  the m i c r o s u b t e s t i s v e r y h o m o g e n e o u s .  The  a  v a l u e f o r the  macro  s c o r e s i s not as h i g h a n d thus i n d i c a t e s a l o w e r d e g r e e of h o m o g e n e i t y .  Item  Validity To  test f o r i t e m v a l i d i t y Spearman's r  s  for tied ranks  was  c a l c u l a t e d b e t w e e n e a c h of the e l e v e n s i t e r a t i n g v a r i a b l e s f o r a l l s t a t i o n s a n d the m i c r o ,  m a c r o , and total s c o r e s .  T a b l e 8 r e v e a l s that, i n g e n e r a l  the m i c r o v a r i a b l e s c o r r e l a t e h i g h l y w i t h the m i c r o s u b t o t a l s but s h o w l i t t l e s i g n i f i c a n t c o r r e l a t i o n w i t h the m a c r o s u b t o t a l s . pattern is also observed  The  reverse  w i t h the m a c r o v a r i a b l e s w h i c h c o r r e l a t e h i g h l y  w i t h the m a c r o s u b t o t a l s a n d p o o r l y w i t h m i c r o s u b t o t a l s .  As  was  110  TABLE  8  S p e a r m a n C o r r e l a t i o n s of the E l e v e n Site R a t i n g V a r i a b l e s w i t h the T h r e e S i t e R a t i n g S c o r e s  For  A l l S t a t i o n s (N = 43)  Variable  Site  No. Micro  Micro Variables  Rating Macro  Scale Total  1  . 81**  .22  . 78-*  2  . 80**  . 19  . 77**  3  . 86*=:<  . 30  .81**  4  . 78**  . 13  . 68**  5  . 37*  .09  . 34*  6  . 18  . 77**  . 38*  7  .26  . 70**  . 44**  8  . 32*  . 59**  . 38*  9  . 38*  . 47**  . 56**  10  .26  . 58**  . 37*  11  .16  . 54=:*  . 31*  Macro Variables  =  p  <  .05  =  p  < .01  Ill expected,  b o t h s e t s of v a r i a b l e s a r e s i g n i f i c a n t l y i n c o r r e l a t i o n w i t h the  total s c o r e s .  It c a n be c o n c l u d e d t h u s , t h a t the s p l i t t i n g of the s i t e r a t i n g s c h e d u l e i n t o m i c r o a n d m a c r o s u b s c a l e s , as done i n the C a l i f o r n i a i s a l s o j u s t i f i e d i n the V a n c o u v e r m a r k e t .  The  study,  i t e m validity test d e m o n -  s t r a t e s t h a t the m i c r o v a r i a b l e s m e a s u r e one a s p e c t of p e r f o r m a n c e w h i l e the m a c r o v a r i a b l e s m e a s u r e a n o t h e r a s p e c t of p e r f o r m a n c e .  The  fact  that t h e r e i s v e r y l i t t l e i n t e r c o r r e l a t i o n b e t w e e n t h e s e two g r o u p s s h o w s that t h e y a r e i n d e e d m e a s u r i n g s e p a r a t e t h i n g s .  The  s a m e i t e m v a l i d i t y a n a l y s i s was  c o m p a n y s t a t i o n s ( T a b l e 9),  done u s i n g o n l y m a j o r  and only independent  s t a t i o n s ( T a b l e 10).  The  r e s u l t s i n d i c a t e t h a t the m i c r o / m a c r o s p l i t i s a p p l i c a b l e e v e n w h e n the m a r k e t i s s e g m e n t e d by d i f f e r e n t m a r k e t i n g  strategies.  T h r e e Stage C o r r e l a t i o n a l A n a l y s i s T o i n v e s t i g a t e the r e l a t i o n s h i p b e t w e e n the s i t e r a t i n g s c o r e s  and  g a l l o n a g e , S p e a r m a n r a n k c o r r e l a t i o n c o e f f i c i e n t s w e r e c o m p u t e d u s i n g the t h r e e s t a g e m o d e l of a n a l y s i s as p r e s e n t e d i n F i g u r e  6  of C h a p t e r  4.  T a b l e 11 r e p o r t s the r e s u l t s of t h i s a n a l y s i s .  S t a g e 1:  major company stations.  It c a n be s e e n t h a t w h i l e the  m i c r o a n d t o t a l s c o r e s a r e s i g n i f i c a n t l y c o r r e l a t e d w i t h g a l l o n a g e , the m a c r o s c o r e s a r e not.  It i s s u s p e c t e d that the v e r y l o w v a l u e of r  the m a c r o s c o r e s i s due i n p a r t to the s a m p l i n g p r o c e d u r e .  s  for  It a p p e a r s  that the m e d i a n g a l l o n a g e s t a t i o n s f o r the m a j o r c o m p a n i e s u s e d i n the  112  TABLE  9  S p e a r m a n C o r r e l a t i o n s of the E l e v e n S i t e  Rating  V a r i a b l e s w i t h the T h r e e S i t e R a t i n g S c o r e s  For  M a j o r S t a t i o n s ( N = 23)  Variable  Site  No. Micro  Micro  Rating Macro  Scale Total  1  . 63**  -. 19  . 58**  2  . 58**  -. 08  . 59**  3  . 78**  .07  . 75**  4  . 61**  -. 16  5  . 26  -. 07  . 19  6  . 14  . 73**  .40*  7  . 05  . 78**  . 36*  8  -.004  . 60**  .15  9  . 53*  . 30  . 55*  10  . 31  . 43*  .32  11  -. 16  . 70**  . 06  Variables  Macro Variables  =  p  <  .05  =  p  <  .01  .42*  113  TABLE  10  S p e a r m a n C o r r e l a t i o n s of the E l e v e n S i t e R a t i n g V a r i a b l e s w i t h the T h r e e S i t e R a t i n g S c o r e s  For  I n d e p e n d e n t S t a t i o n s ( N = 20)  Variable  No.  Site Micro  Micro  Rating Macro  Scale Total  1  . 72**  .26  . 69**  2  . 84**  . 15  . 73**  3  . 82**  . 56**  . 78**  4  . 64**  .05  . 58**  5  . 60**  .21  . 54**  6  . 15  . 65**  . 31  7  .23  . 56**  . 34  8  . 53*  . 58**.  . DO'"  9  . 56*-!=  . 58**  . 67**  10  .46*  . 79**  . 58**  11  .28  . 31  .36  Variables  Macro Variables  =  p  <  .05  =  p  < .01  1  1  114  TABLE  11  S p e a r m a n C o r r e l a t i o n s f o r M i c r o , M a c r o and Site R a t i n g  Site Rating  Scores Against  Gallonage  M a j o r s (N=23)  Scores  Total  Independents  All  Stations  (N=43)  (N«20) Micro  . 70=:*  . 51*  . 14  Macro  .07  .65**  .21  Total  .83**  . 66**  .25  *  - p = <  . 05  **  p = <  .01  s a m p l e a r e l o c a t e d i n v e r y s i m i l a r s o c i o - e c o n o m i c a r e a s of the W h e n the s t a t i o n s w e r e r a t e d , i t was  n o t e d that t h e r e was  d i f f e r e n c e i n i n c o m e , s o c i a l status, and i n g the m a j o r c o m p a n y s t a t i o n s .  city.  v e r y little  d e v e l o p m e n t of the a r e a s  T h i s h o m o g e n e i t y has  obviously  surroundbeen  r e f l e c t e d i n the m a c r o s u b s c o r e s .  It c a n be s e e n that, f o r t h i s s a m p l e , the o n l y s i g n i f i c a n t d i f f e r e n c e a m o n g s t a t i o n s i s i n the m i c r o r a t i n g s .  In o t h e r w o r d s , s t a t i o n s r e c e i v i n g  h i g h m i c r o r a t i n g s b e c a u s e of f a c t o r s s u c h as s u p e r i o r f a c i l i t i e s  and  a c c e s s i b i l i t y , have g e n e r a l l y h i g h e r gallonage f i g u r e s .  T h i s w o u l d s e e m to s u b s t a n t i a t e C a l i f o r n i a study.  the b a s i c f i n d i n g s of the  It a l s o s h o w s that the m i c r o v a r i a b l e s do f u n c t i o n  s u r r o g a t e m e a s u r e s of g a l l o n a g e  as  performance.  S i n c e g a l l o n a g e i s the o n l y c r i t e r i o n m e a s u r e u s e d i n the  present  s t u d y , i t s e e m s f r u i t l e s s to d i s c u s s the m a c r o v a r i a b l e s as i n d i c a t o r s of  115  site quality.  T h i s i s b e c a u s e the m a c r o v a r i a b l e s w e r e  originally  d e s i g n e d as s u r r o g a t e m e a s u r e s of the s t a t i o n ' s e c o n o m i c l i f e .  The  conclusion  r e a c h e d i n Stage 1 is thus:  i n t e r m s of g a l l o n a g e  p e r f o r m a n c e , the m i c r o v a r i a b l e s of the s i t e r a t i n g i n s t r u m e n t a r e a v a l i d m e a s u r e of s i t e q u a l i t y f o r m a j o r c o m p a n y s t a t i o n s .  S t a g e 2:  independent stations.  T a b l e 11 r e v e a l s  t h a t the t o t a l  and  m a c r o s c o r e s w e r e m o r e s i g n i f i c a n t l y c o r r e l a t e d w i t h g a l l o n a g e t h a n the micro scores.  It a p p e a r s i n t h i s c a s e that the m a c r o v a r i a b l e s a r e a  m e a s u r e of g a l l o n a g e t h a n a r e the m i c r o v a r i a b l e s .  The  better  f a i l u r e of the  m i c r o v a r i a b l e s to a d e q u a t e l y f u n c t i o n as s u r r o g a t e m e a s u r e s of s i t e q u a l i t y for  i n d e p e n d e n t s t a t i o n s was  a n t i c i p a t e d i n the r e s e a r c h  A l t h o u g h i t w o u l d a p p e a r that i n d e p e n d e n t s t a t i o n s a r e q u a l i t y and  l a c k the f a c i l i t i e s a n d  of g e n e r a l l y  In a c t u a l f a c t ,  on the a v e r a g e , p u m p m o r e t h a n t w i c e as m u c h g a s o -  l i n e as do the m e d i a n g a l l o n a g e s t a t i o n s f o r the m a j o r c o m p a n i e s . Table  lower  a c c e s s i b i l i t y e n j o y e d by m a j o r s t a t i o n s ,  i t d o e s not n e c e s s a r i l y m e a n that t h e y s e l l l e s s g a s o l i n e . independent dealers,  hypothesis.  (See  4 , C h a p t e r 4 .)  The  r e s u l t s a l s o i n d i c a t e the p r i c e - c u t t e r ' s s t r o n g  the s u r r o u n d i n g a r e a .  dependence  B e c a u s e the i n d e p e n d e n t ' s s t r a t e g y i s one  on  of m a r k e t  s e g m e n t a t i o n , the m o s t s u c c e s s f u l s t a t i o n s a r e t h o s e l o c a t e d i n a r e a s containing station.  the h i g h e s t In g e n e r a l ,  proportion  of p e o p l e l i k e l y to f r e q u e n t that t y p e of  the i n d e p e n d e n t s t a t i o n s w e r e f o u n d i n l o w e r i n c o m e  a r e a s , on the e d g e of the C . B . D . , o r i n a s s o c i a t i o n w i t h d e p a r t m e n t stores  or shopping centers.  The  variance  a m o n g the p r i c e - c u t t e r s i s  116  r e f l e c t e d by differences i n the socio-economic environment of the i n d i v i d u a l stations as m e a s u r e d by the m a c r o subs c o r e s , whereas the v a r i a n c e in gallonage of the m a j o r companies is due l a r g e l y to the f a c i l i t i e s they offer as m e a s u r e d by the m i c r o s u b s c o r e .  The conclusion r e a c h e d i n Stage 2 i s : i n t e r m s of gallonage p e r f o r m a n c e , the m i c r o v a r i a b l e s of the site rating i n s t r u m e n t are not good m e a s u r e s of site quality f o r independent stations.  Although it would appear that the independent stations a r e of a g e n e r a l l y lower quality i n t e r m s of f a c i l i t i e s and convenience than the m a j o r stations, it is s t i l l conceivable that the m i c r o v a r i a b l e s could be v a l i d m e a s u r e s of site quality.  T h i s point is i l l u s t r a t e d i n F i g u r e I I ,  where both the m a j o r and independent stations have equal beta ( /3 ) coefficients f o r hypothetical least squares equations. In this case the least squares lines would be p a r a l l e l , and f o r points of equal gallonage, the independent stations would have lower site rating s c o r e s .  In actual fact, however, this situation does not exist.  F i g u r e 12  gives a scatter plot of both m a j o r and independent stations with their r e s p e c t i v e least squares l i n e s .  A s can be seen, these lines a r e not  parallel.  It must be concluded then, that f o r independent stations, some surrogate m e a s u r e other than the m i c r o subtotal should be used to m e a s u r e site quality.  It would appear that the gallonage p e r f o r m a n c e of independent  stations is based on c r i t e r i a other than f a c i l i t i e s and convenience.  The  SITE R A T I N G S C O R E S F I G U R E 11. HYPOTHETICAL  LEAST  SQUARES  LINES  •  8TI  119 h i g h e r c o r r e l a t i o n v a l u e s f o r the m a c r o a n d  total scores would s e e m  to  s u g g e s t that a s i t e r a t i n g i n s t r u m e n t b a s e d on v a r i a b l e s that m e a s u r e  the  s u r r o u n d i n g a r e a w o u l d be a l i k e l y s t a r t i n g p o i n t .  It s h o u l d be  c l e a r at t h i s p o i n t that i n d e p e n d e n t s t a t i o n s a r e  of  d i f f e r e n t q u a l i t y t h a n the m a j o r c o m p a n y s t a t i o n s .  S t a g e 3:  a l l stations.  The  r e s u l t s of the t h i r d s t a g e of the  a n a l y s i s m o d e l s t r o n g l y i n d i c a t e that the s i t e r a t i n g i n s t r u m e n t w i l l not work u n i v e r s a l l y when a l l stations are included.  This  reinforces  the  f i n d i n g of the s e c o n d s t a g e that i n o r d e r to p r e d i c t the p e r f o r m a n c e of gasoline  s e r v i c e stations which employ a p r i c e - c u t t i n g strategy,  d i f f e r e n t m e a s u r e m e n t of s i t e q u a l i t y m u s t be u s e d . and  This  d i f f e r e n c e , i t i s s u g g e s t e d , s h o u l d be  w e l l the i n d e p e n d e n t v a r i a b l e s ( i . e . m i c r o ,  total scores) predicted  p e r f o r m e d on the  The  gallonage a least squares analysi s  data.  b a s i c m e t h o d of l e a s t s q u a r e s r e d u c e s to a p r o b l e m of f i t t i n g  a s t r a i g h t l i n e to a s e t of p o i n t s . e s t i m a t e s of  of r e t a i l s i t e s .  Analysis  In o r d e r to s e e how m a c r o , and  recognized  p l a n n e r s , b o t h of w h o m to date h a v e l a r g e l y i g n o r e d s u c h  differences in their consideration  Least Square  gasoline,  s i t e q u a l i t y r e q u i r e m e n t s i n the u r b a n e n v i r o n m e n t  quite d i s s i m i l a r .  by a c a d e m i c s a n d  was  E v e n though m a j o r  i n d e p e n d e n t s t a t i o n s p e r f o r m the s a m e f u n c t i o n , i . e . r e t a i l i n g  t h e i r l o c a t i o n a l and are  a  a  and  /3  This  i n the l i n e , Y  i s a c h i e v e d by c h o o s i n g a n y =  a  +  j3  X,  two  as to m i n i m i z e  the  120  s u m  of the  squares  of the  I  where  and  a  obtained  e r r o r s  150  in this  way  of any  &  (1947)  emphasizes  no  group  of  1967,  point  is  data  scientist  by  for  Y  to  be  defined  i n the  is  standard  i n the  the  fact  cannot  a  is  method  of least  as  Y ' s "  that  L i n d l e y  squares  it applies  least  meet  the  squares  m e a s u r e d  by  assumption  analysis.  the  standard  f o r m u l a :  s.ys,''-Y  where  Y  Y  n  Table  = the  = the  1  actual  predicted  = n u m b e r  12  value  reports  of  the  Y >i  of the  value  of the  observations  results  dependent  of the  variable  dependent  (Hoel,  least  1966,  variable  p.  squares  218)  analysis  in t e r m s  of  I gallons  shows  per  the  month for  scatter  plot  m a j o r ,  and  independent,  least  squares  and all stations.  lines  to  241).  study  line  note,  distributions  (p.  apply  squares  estimates  smallest  expansions  to  "The  of o b s e r v a t i o n s "  least  the  that  n o r m a l l y distributed.  probability  to  showed  linear  that  present  respectively.  (ii) h a v e  Important  data  the  /?  Gauss  are  saying  i n the  as  and  that  still p e r m i s s i b l e  of the  estimate  the  and  a  147).  about  o r d e r e d pairs  it  the  p.  require  the  of  estimators  this  effectiveness  of  ago  2  (i) u n b i a s e d ,  assumptions  of n o r m a l i t y ,  e r r o r  are  not  Although  The  years  C o c h r a n ,  proof does  requires  estimators  unbiased  G a u s s '  - 3x)  a  are  0  "About  (Snedicor  any  (Y~  e r r o r s :  for  both  the  F i g u r e  m a j o r  and  13  S c a t t e r Plot of Lines Based on  Major Total  a n d Independent Scores  Stations  with their  Respective  2,000-!  I  a  O  Major  Stations  ( N = 23)  •  Independent Stations (N = 20)  «^ o ©  o o s> c  o  1,000.  "5 °  800J  52  600-  400-  200. —  T~ 40  FIGURE  13.  1  60  50  Total Site R a t i n g  Score  Least  Squares  122  TABLE  12  S t a n d a r d E r r o r of E s t i m a t e f r o m L e a s t S q u a r e s A n a l y s i s S t a n d a r d E r r o r of E s t i m a t e ( S )  T y p e of Station a)  e  M a j o r C o m p a n i e s ( N = 23) Micro  3, 700  Macro  5,800  Total  1,900  b) I n d e p e n d e n t S t a t i o n s ( N = 20)  c)  Micro  37, 300  Macro Total  27,300 32,500  A l l S t a t i o n s ( N = 43) Micro  31,000  Macro Total  25,200  independent stations.  30,700  A c c o r d i n g t o the S p e a r m a n c o r r e l a t i o n s t h e t o t a l  s i t e r a t i n g s c o r e f o r b o t h g r o u p s of m a r k e t e r s s h o u l d be the b e s t p r e d i c t o r  of g a l l o n a g e .  B y u s i n g t o t a l s i t e r a t i n g s c o r e a s the i n d e p e n d e n t v a r i a b l e , the least squares  m o d e l c o u l d p r e d i c t the g a l l o n a g e o f the m a j o r i t y of m a j o r  c o m p a n y s t a t i o n s t o w i t h i n 1,900 g a l l o n s p e r m o n t h .  In t e r m s of a v e r a g e  m o n t h l y g a l l o n a g e p e r s t a t i o n t h i s r e p r e s e n t s a n e r r o r o f l e s s t h a n 10 p e r cent.  D i s c u s s i o n w i t h o i l c o m p a n y o f f i c i a l s r e v e a l e d that t h i s e r r o r i n  p r e d i c t i o n i s w e l l w i t h i n the l i m i t s u s e d b y o i l c o m p a n i e s t h e m s e l v e s i n p r e d i c t i n g the g a l l o n a g e o f a s e r v i c e s t a t i o n s i t e .  It a p p e a r s o n c e a g a i n  that the s i t e r a t i n g i n s t r u m e n t i s i n d e e d a v a l i d m e a s u r e o f s i t e q u a l i t y .  123 A l t h o u g h the r e s u l t s f o r the i n d e p e n d e n t s t a t i o n s r e v e a l the f a c t that the m a c r o v a r i a b l e s a r e the b e s t p r e d i c t o r s  of g a l l o n a g e , c a l c u l a t i o n  of the e r r o r i n t e r m s of a v e r a g e m o n t h l y g a l l o n a g e r e v e a l e d 73 p e r  cent.  an e r r o r  of  T h i s w o u l d s e e m to i n d i c a t e that the v a r i a b l e s i n the l e a s t  s q u a r e s m o d e l a r e not g o o d p r e d i c t o r s  of g a l l o n a g e f o r i n d e p e n d e n t s t a t i o n s .  C a l c u l a t i o n of p e r c e n t a g e e r r o r f o r a l l s t a t i o n s ( a g a i n u s i n g m a c r o v a r i a b l e s ) p r o d u c e d an e r r o r of 80 p e r u n e x p e c t e d and  cent.  This  r e s u l t was  the not  c o n f i r m s the f i n d i n g of the t h r e e s t a g e c o r r e l a t i o n a n a l y s i s  t h a t the i n s t r u m e n t c a n n o t f u n c t i o n u n i v e r s a l l y f o r s t a t i o n s  employing  different marketing strategies.  Parametric Correlation A  Analysis  p a r a m e t r i c c o r r e l a t i o n a n a l y s i s v e r y s i m i l a r to the  n o n p a r a m e t r i c a n a l y s i s was  a l s o p e r f o r m e d on the d a t a .  w e l l a w a r e of the l i m i t i n g a s s u m p t i o n s r e g a r d i n g and  The  preceding author is  such s t a t i s t i c a l tests  p r e s e n t s the r e s u l t s of the p a r a m e t r i c a n a l y s i s o n l y as a n i n t e r e s t i n g  comparison. following  No  conclusions  or inferences  are  being drawn f r o m  the  analysis.  The  c o r r e l a t i o n s t a t i s t i c u s e d i n the f o l l o w i n g t e s t s was  f a m i l i a r P e a r s o n r.  T a b l e s 13,  14,  and  the  15 p r e s e n t the c o r r e l a t i o n  c o e f f i c i e n t s of the e l e v e n s i t e r a t i n g v a r i a b l e s w i t h the t h r e e s i t e r a t i n g s c o r e s f o r the m a j o r c o m p a n i e s , f o r the p r i c e - c u t t e r , a n d  for a l l stations.  T a b l e 16 c o n v e y s the r e s u l t s of the P e a r s o n c o r r e l a t i o n s b e t w e e n s i t e r a t i n g s c o r e s and  gallonage.  124  TABLE  13  P e a r s o n C o r r e l a t i o n s of the E l e v e n S i t e R a t i n g V a r i a b l e s w i t h the T h r e e S i t e R a t i n g S c o r e s Major Companies  Variable  Site  No. Total  Micro Variables  Macro Variables  For  ( N = 23)  Rating  Scale  Micro  Macro  1  . 60**  . 76**  -.40  2  . 57**  .67**  -. 31  3  . 75**  . 74**  -.09  4  . 31  .44*  -.05  5  .04  . 18  -.24  6  . 31  -. 14  . 76**  7  .25  -. 17  . 76**  8  -. 10  -.44*  . 60**  9  . 34  10  -. 13  11  .07  = p  <  .05  = p  < . 01  .35  . 02  -.002  . 13  -.29  . 63**  125  TABLE  14  P e a r s o n C o r r e l a t i o n s of the E l e v e n S i t e R a t i n g V a r i a b l e s w i t h the T h r e e S i t e R a t i n g S c o r e s  For  P r i c e -C u t t e r s ( N = 20)  Variable  Site  No.  Rating  Total Micro Variables  Macro Variables  Scale  Micro  Macro  1  . 77**  .81**  .16  2  . 89**  . 92**  . 14  3  .81**  .83**  .20  4  . 56**  . 66**  5  . 52*  . 53*  . 13  6  .28  . 05  .80**  7  .20  . 02  . 80**  8  .25  . 18  .27  9  . 56**  .  .23  -.08  „ 79**  10  . 49*  .24  . 74**  11  . 15  . 11  . 35  p  <  .05  p  < . 01  126  TABLE  15  P e a r s o n C o r r e l a t i o n s of the E l e v e n S i t e R a t i n g V a r i a b l e s w i t h the T h r e e S i t e R a t i n g S c o r e s  For  A l l S t a t i o n s ( N = 43)  Variable  Site  No. Total  .Micro Variables  Macro Variables  =  p  Rating  Scale  Micro  Macro  1  . 80**  .85**  . 07  2  . 83**  . 87**  .11  3  . 84**  .85**  . 18  4  .71**  . 76**  .11  5  . 34*  . 38**  -. 02  6  . 43**  .11  . 78**  7  . 33*  .13  . 70**  8  . 13  .01  .44**  9  . 53**  .17  . 53**  10  .45**  . 01  . 52**  11  . 31*  . 05  . 47**  <  .05  = p <  .01  127  TABLE Pearson  Correlations  16  B e t w e e n Site R a t i n g S c o r e s and Gallonage  Site R a t i n g Scores  Majors  Micro  . 74**  Independents  ( N = 23)  (N = 20)  . 82**  Total * **  = =  p p  < <  Stations  (N = 43) -.01  .40  -. 02  Macro  All  . 76**  .45**  . 64**  . 15  .05 .01  A s c a n be e a s i l y s e e n , the r e s u l t s of the p a r a m e t r i c a r e e x t r e m e l y s i m i l a r to the n o n p a r a m e t r i c  correlations  correlations.  A S m a l l C a s e Study In the c o u r s e of r a t i n g the s t a t i o n s s e l e c t e d f o r the p r e s e n t s t u d y , the a u t h o r b e c a m e a w a r e o f a n i n t e r e s t i n g s i t u a t i o n . company  s t a t i o n s w e r e c h o s e n at r a n d o m f r o m  A l t h o u g h the m a j o r  a prepared list, it  o c c u r r e d that t h r e e s t a t i o n s i n the s t u d y w e r e l e s s t h a n two b l o c k s each other.  from  F i g u r e 14 i l l u s t r a t e s t h e i r r e l a t i v e s t r e e t l o c a t i o n s .  Station A and C w e r e m a j o r company stations belonging to c o m p e t i t i v e f i r m s , while Station B o p e r a t e d as a p r i c e - c u t t e r s e l l i n g l i n e at 4£ l e s s p e r g a l l o n t h a n the o t h e r two.  A l l stations w e r e on m a j o r  c i t y a r t e r i e s w i t h S t a t i o n C h a v i n g the h i g h e s t t r a f f i c  count.  T a b l e 17 p r e s e n t s the p e r t i n e n t d a t a on a l l t h r e e s t a t i o n s . be s e e n that the m a j o r c o m p a n y  gaso-  It c a n  stations (A and C) p u m p v e r y s i m i l a r  FIGURE  14.  Relative  Street  Location  of  Three  Stations  in  Small  Case  Study  TABLE  17  G a l l o n a g e a n d Site R a t i n g D a t a f o r T h r e e S t a t i o n s i n t h e C a s e S t u d y Yearly Station  Gallonage  T o t a l Site Rating  Score  Predicted From  Gallonage  Least  Squares  R a t i o of G a l l o n s Per  Difference  Unit Score  Analysis  A  233,835  60  237,890  3,897 , ^  C  273,000  63  265,140  436  4, 333 ^4,757  B  500,000  55  786,360  (A-C)  9,090^"^  (C-B)  130  v o l u m e s w h i l e the p r i c e - c u t t e r p u m p s t w i c e a s m u c h g a s o l i n e a s the o t h e r two.  T h e site rating s c o r e s f o r stations A and C a r e a l s o v e r y  The p r i c e - c u t t e r ' s s c o r e , however, is a full five points l o w e r .  similar. When  r a t i o s of g a l l o n a g e p e r u n i t s c o r e ( i . e . t o t a l g a l l o n a g e d i v i d e d b y t o t a l s c o r e ) a r e c a l c u l a t e d the m a j o r s t a t i o n s a r e a g a i n v e r y c l o s e , d i f f e r e n c e b e i n g o n l y 436 g a l l o n s / u n i t s c o r e .  their  In t e r m s o f m o n t h l y g a l l o n a g e  t h i s r e p r e s e n t s a f i g u r e of 36 g a l l o n a g e s / u n i t s c o r e .  It w o u l d a p p e a r , a g a i n ,  that f o r m a j o r c o m p a n y s t a t i o n s , the s i t e r a t i n g i n s t r u m e n t i s v e r y . u n i f o r m and a c c u r a t e .  T h e p r e d i c t e d g a l l o n a g e s f o r the i n d i v i d u a l s t a t i o n s , i n this  i n s t a n c e , a r e s u r p r i s i n g l y c l o s e to the a c t u a l f i g u r e s g i v e n b y the respective  companies.  T h e p r i c e - c u t t e r , on the o t h e r h a n d , s h o w s a g a l l o n / u n i t s c o r e o f 9090, m o r e t h a n t w i c e t h a t o f the m a j o r  stations.  It s e e m s c l e a r i n t h i s l i m i t e d c a s e , that g i v e n e q u a l f a c i l i t i e s a n d l o c a t i o n a l a d v a n t a g e , the p r i c e - c u t t e r c a n p u m p m o r e t h a n t w i c e a s m u c h g a s o l i n e a s the m a j o r c o m p a n y s t a t i o n s .  This is accomplished  by adopting  a s t r a t e g y o f c u t t i n g p r i c e b y 4£ p e r g a l l o n .  A l t h o u g h t h i s c a s e s t u d y i s a l i m i t e d i n s t a n c e i t d o e s s e r v e to d e m o n s t r a t e the d r a m a t i c  e f f e c t s on the l a n d s c a p e  marketing strategy can create.  that a c h a n g e i n  It a l s o d e m o n s t r a t e s that a s h i f t i n  s t r a t e g y c h a n g e s the q u a l i t a t i v e n a t u r e of the i n d i v i d u a l s i t e .  CHAPTER  CONCLUSIONS AND  The  site r a t i n g i n s t r u m e n t was  5  IMPLICATIONS  d e m o n s t r a t e d to be a v a l i d  m e a s u r e of s i t e q u a l i t y f o r m a j o r c o m p a n y s t a t i o n s .  V e r i f i c a t i o n was  p e r f o r m e d b y the S p e a r m a n a n a l y s i s , the l e a s t s q u a r e s a n a l y s i s of the s a m p l e of s t a t i o n s , a n d the s m a l l  case study.  F o r the m a j o r i t y  of m a j o r  s t a t i o n s i n the s t u d y , g a l l o n a g e c o u l d be p r e d i c t e d w i t h i n a s t a n d a r d of 1 , 9 0 0 g a l l o n s p e r m o n t h .  T h e r e s u l t s of t h i s p a r t of the  error  research  c o n f i r m the f i n d i n g s of C l a u s ' e x p e r i m e n t w i t h s e r v i c e s t a t i o n s i n California.  In c o n t r a s t ,  the s i t e r a t i n g i n s t r u m e n t a s a m e a s u r e o f q u a l i t y  f o r the i n d e p e n d e n t s t a t i o n s s h o w e d a s e r i o u s predict gallonage.  w e a k n e s s i n i t s a b i l i t y to  T h e s i t e r a t i n g s c o r e t h a t p r o d u c e d the h i g h e s t  c o r r e l a t i o n w i t h g a l l o n a g e was  the m a c r o s u b t o t a l , i . e . t h o s e  variables  c o n c e r n e d w i t h the s o c i o - e c o n o m i c e n v i r o n m e n t s u r r o u n d i n g the s t a t i o n . Differences  i n the m i c r o v a r i a b l e s ( d e s i g n a n d l a y o u t ) h a d v e r y l o w  c o r r e l a t i o n s with gallonage.  It w a s a l s o s h o w n that the m a c r o s c o r e s f o r  b o t h the m a j o r a n d i n d e p e n d e n t s t a t i o n s w e r e d r a w n f r o m the s a m e statistical population.  A s a n t i c i p a t e d , the p r i c e - c u t t e r s h a d  generally  132 l o w e r q u a l i t y stations (in t e r m s of the r a t i n g i n s t r u m e n t ) but they i n v a r i a b l y pumped m o r e g a s o l i n e (on equivalent ratings) than the m a j o r stations.  The  m o s t evident f a c t o r to e x p l a i n this gallonage d i s c r e p a n c y i s  the d i f f e r e n t m a r k e t i n g s t r a t e g i e s : venience.  p r i c e - c u t t i n g v e r s u s t i m e and  con-  It m u s t be concluded that the q u a l i t y r e q u i r e m e n t s f o r a m a j o r  s t a t i o n and an independent s t a t i o n are not c o m p a r a b l e on the same b a s i s .  T h i s l a c k of d i r e c t c o m p a r i s o n was  a l s o d e m o n s t r a t e d i n the  s e r i e s of M a n n - W h i t n e y U tests w h i c h showed the g a l l o n a g e s , m i c r o s c o r e s , and t o t a l s c o r e s to be f r o m two d i f f e r e n t s t a t i s t i c a l p o p u l a t i o n s . D i r e c t c o m p a r i s o n s a l s o f a i l e d i n Stage 3 of the S p e a r m a n c o r r e l a t i o n a n a l y s i s and i n the l e a s t s q u a r e s a n a l y s i s .  F r o m the r e s u l t s i t can be concluded that the r e q u i r e m e n t s f o r building and l o c a t i n g a high q u a l i t y site f o r a p r i c e - c u t t e r are m u c h d i f f e r e n t than the r e q u i r e m e n t s demanded by a m a j o r company i n b u i l d i n g and l o c a t i n g a high q u a l i t y s i t e .  If this i s t r u e , then we  m u s t a c c e p t the  o r i g i n a l r e s e a r c h hypothesis that d i f f e r e n t m a r k e t i n g s t r a t e g i e s can cause d i f f e r e n c e s i n site q u a l i t y .  It follows f r o m the hypothesis that i n o r d e r to m a k e the best use of any p a r t i c u l a r l o c a t i o n , a company should choose the a p p r o p r i a t e m a r k e t i n g s t r a t e g y and b u i l d the site a c c o r d i n g l y .  C o m p a n i e s not only  influence the landscape i n this way,  but i n t u r n , the l a n d s c a p e c r e a t e s  changes i n c o m p a n y p o l i c y .  i l l u s t r a t e d i n C h a p t e r 3, c o m p a n i e s  A s was  are a c u t e l y aware of e n v i r o n m e n t a l changes and are u s u a l l y quick to react.  In the case of s e r v i c e s t a t i o n s , for e x a m p l e , a change i n the r o a d  133 network o r population  strategy m a y necessitate a shift i n strategy.  A  declining neighborhood station may sometimes make an ideal p r i c e - c u t t e r .  This  study has i m p l i c a t i o n s f o r city p l a n n e r s .  In o r d e r t o m a k e  the m o s t e f f i c i e n t u s e of u r b a n s p a c e d i f f e r e n c e s i n s i t e q u a l i t y s h o u l d be taken into account.  M a k i n g e i t h e r the p r i c e - c u t t e r o r the m a j o r  company  a d h e r e to a s i n g l e s e t o f c r i t e r i a w i l l c r e a t e a n i n e f f i c i e n t a n d i n e q u i t a b l e s y s t e m ; i n e f f i c i e n t i n the s e n s e that the c o n s u m e r w i l l p a y m o r e f o r h i s g a s o l i n e ; a n d i n e q u i t a b l e i n that i t g i v e s one c o m p e t i t o r u n d u e a d v a n t a g e over another.  A n y diseconomies created  by an inadequate s y s t e m  l i k e l y be p a s s e d onto the c o n s u m e r i n the f o r m o f i n c r e a s e d  will  prices.  V a n c o u v e r has s u c h r e s t r i c t i v e zoning on s e r v i c e s t a t i o n s . In 1968,  d r a w i n g u p o n Judge M o r r o w ' s findings that t h e r e w e r e t o o m a n y  s e r v i c e stations i n B r i t i s h C o l u m b i a , V a n c o u v e r C i t y C o u n c i l  embarked  on a c o n s c i o u s p o l i c y o f l i m i t i n g the n u m b e r o f s e r v i c e s t a t i o n s b e i n g b u i l t in Vancouver.  A t w o - p a r t s t u d y i n t o the l o c a t i o n a n d q u a l i t y o f s e r v i c e  s t a t i o n s w a s l a u n c h e d b y C o u n c i l i n O c t o b e r o f 1968 ( C i t y o f V a n c o u v e r Planning Department,  1968, 1969).  T h e e s s e n t i a l r e c o m m e n d a t i o n s of  the P l a n n i n g B o a r d that p e r f o r m e d the s t u d i e s w e r e a c t i v a t e d u n d e r B y - l a w N o . 4423 i n A p r i l 1969* v e s t i n g the f i n a l d e c i s i o n on the b u i l d i n g of a n y s e r v i c e s t a t i o n i n V a n c o u v e r w i t h C i t y C o u n c i l .  In other w o r d s ,  J-Based on the A m e r i c a n S o c i e t y o f P l a n n i n g O f f i c i a l s ( A . S. P.O. ) I n f o r m a t i o n R e p o r t N o . 140 the B y - l a w a l l o w s s e r v i c e s t a t i o n s to l o c a t e "conditionally" i n C - l , C-2, and C-3 zones.  134 a l l a p p l i c a t i o n s f o r new C o u n c i l at a n o p e n  The  s e r v i c e station sites are presented before  hearing.  o r i g i n a l i n t e n t i o n of C o u n c i l was t o l i m i t the t o t a l n u m b e r o f  service stations.  However, Council's  e f f o r t s h a v e h a d j u s t the o p p o s i t e  effect.  A l t h o u g h the g a s o l i n e had  s e r v i c e station industry i n North A m e r i c a  s e e n a m a r k e d d e c l i n e i n the r e l a t i v e n u m b e r o f s e r v i c e s t a t i o n s a s  w e l l as a n absolute  decline i n some a r e a s , after C i t y C o u n c i l initiated its  p l a n i n 1968, the n u m b e r o f o u t l e t s i n V a n c o u v e r h a s s i n c e a l m o s t constant.  S i n c e 1957, f o r e x a m p l e , I m p e r i a l  remained  O i l r e d u c e d its  n u m b e r o f s t a t i o n s i n B r i t i s h C o l u m b i a b y 85 ( o r 13 p e r c e n t ) , w h i l e the motor vehicle population  increased  b y 74 p e r c e n t ( I m p e r i a l O i l , 1967,  p. 9). In the y e a r s b e t w e e n 1962 a n d 1967 the C i t y of V a n c o u v e r e x p e r i e n c e d a d e c l i n e i n the n u m b e r o f s e r v i c e s t a t i o n s f r o m 376 t o 340 ( o r 9.57 p e r c e n t ) .  S i n c e 1967, w h e n the M o r r o w C o m m i s s i o n  Report  appeared and C i t y C o u n c i l launched its campaign against s e r v i c e stations, the a b s o l u t e  n u m b e r o f o u t l e t s h a s r e m a i n e d r e l a t i v e l y c o n s t a n t , i . e . 342  i n 1970.  A l t h o u g h the s l o w d o w n i n the d e c l i n e o f s t a t i o n s c o u l d be a t t r i b u t a b l e to the e n t r y o f s e v e r a l new  c o m p e t i t o r s , p l u s the r i s i n g  e m p l o y m e n t i n c e n t r a l V a n c o u v e r , d i s c u s s i o n with o i l company t i v e s i n d i c a t e s that C o u n c i l i s r e s p o n s i b l e of e v e n t s .  for preventing  representa-  the n a t u r a l  trend  S e v e r a l o i l c o m p a n i e s t h e m s e l v e s h a v e i n d i c a t e d that t h e y w i s h  135 to r e d u c e t h e i r t o t a l n u m b e r of s t a t i o n s , but a r e p r e v e n t e d i n d o i n g mor  r a p i d l y by the p r e s e n t s i t u a t i o n .  E l s e w h e r e in N o r t h A m e r i c a , property, The  companies are  s e l l i n g off s t a t i o n  w h i l e c o n s o l i d a t i n g t h e i r m a r k e t i n t o f e w e r but  b a s i c p r o c e s s i s one  p o o r e r locations and way  so  they may  of e l i m i n a t i n g two  b u i l d i n g one  or three  bigger  s m a l l stations in  l a r g e s t a t i o n that i s w e l l l o c a t e d .  still maintain their m a r k e t share while reducing  n u m b e r of s t a t i o n s .  The  o t h e r f o r m s of l a n d  use.  stations.  the  In t h i s total  p r o c e s s also makes additional land available for  In V a n c o u v e r , h o w e v e r , the o i l c o m p a n i e s a r e not a l l o w e d to build stations where they would l i k e . built i n a l o c a t i o n that i s a l r e a d y c a n n o t r i s k g i v i n g up two i m p r o v e d one)  or three  O f t e n i t i s d i f f i c u l t to get a s t a t i o n  properly  zoned.  B e c a u s e the  s t a t i o n s b e f o r e a new  one  (or  companies an  i s b u i l t , t h e y t e n d to h o l d on to t h e i r p r e s e n t s i t e s .  Many  c o m p a n i e s w o u l d l i k e to t u r n o l d , o u t d a t e d , a n d u n p r o f i t a b l e s t a t i o n s to o t h e r f o r m s of l a n d u s e  but a r e p r e v e n t e d i n d o i n g s o by the f e a r of l o s i n g  a p o r t i o n of t h e i r m a r k e t s h a r e .  If a c o m p a n y e l i m i n a t e s  a station without  r e p l a c i n g i t , a l l i t s o t h e r s t a t i o n s m u s t s e l l m o r e g a s o l i n e to m a k e up  for  this l o s s .  Generally, on t h e i r i n v e s t m e n t .  a l l c o m p a n i e s m u s t a c h i e v e a r e q u i r e d r a t e of r e t u r n In a m a r k e t w h e r e c o n t i n u e d r e s p o n s e to a c h a n g i n g  e n v i r o n m e n t c a n n o t be m a i n t a i n e d the c o m p a n y h a s the p r i c e of the p r o d u c t , a n d choice  2)  two  choices:  l o w e r the c a p i t a l i n v e s t m e n t .  i s u n b e n e f i c i a l to the p u b l i c .  1)  raise  Either  136 An  e x c e l l e n t e x a m p l e of s e r v i c e s t a t i o n c o n s o l i d a t i o n o c c u r r e d i n  R i c h m o n d , B r i t i s h C o l u m b i a , w h e r e G u l f a g r e e d to c l o s e d o w n t h r e e of i t s f a c i l i t i e s i f i t c o u l d b u i l d one c h o i c e of l o c a t i o n a n d gasoline  i t . G u l f was  so s u c c e s s f u l i n its  f a c i l i t i e s that the s i n g l e l o c a t i o n i s now  t h a n the o t h e r t h r e e d i d c o m b i n e d .  also benefited business  to r e p l a c e  The  pumping  more  M u n i c i p a l i t y of R i c h m o n d  by r e c e i v i n g m o r e c o m m e r c i a l s p a c e p l u s a v e r y  successful  enterprise.  A l t h o u g h p r i c e c u t t e r s w i l l a l w a y s be i n the m a r k e t p l a c e , u n c o m m o n f o r t h e m to c o n t r o l m o r e t h a n 10 p e r  c e n t of the m a r k e t .  V a n c o u v e r , h o w e v e r , p r i c e - c u t t e r s a c c o u n t f o r 15.61 s a l e s , but o n l y 5.88  per  it is  per  c e n t of the n u m b e r of s t a t i o n s .  In  c e n t of the The  volume  reason for  t h i s u n c o m m o n d i s c r e p a n c y a p p e a r s to s t e m i n p a r t f r o m the f a c t that m a j o r c o m p a n i e s a r e h i n d e r e d i n t h e i r n o r m a l f o r m of c o m p e t i t i o n by  the  l o c a l z o n i n g r e s t r i c t i o n s as w e l l as the p r e v i o u s l y m e n t i o n e d r e f i n e r y c o m p l i c a t i o n s ( C h a p t e r 4).  It a p p e a r s that a s l o w d o w n of the g e n e r a l m a r k e t t r e n d contributed market.  i n s o m e e x t e n t to the g r o w t h of p r i c e - c u t t e r s i n the  If s u f f i c i e n t s e r v i c e a n d  gasoline  f r o m the  ^Interview with Mr.  Ray  Pochmara  l e s s v i s i b l e site and  Gulf O i l  the  cheapest  B e c a u s e the p r i c e - c u t t e r d o e s not n e e d g o o d f a c i l i t i e s , he  a f f o r d to p u r c h a s e a m o r e i n a c c e s s i b l e a n d  (1970).  Vancouver  c o n v e n i e n c e c a n n o t be o f f e r e d by  m a j o r c o m p a n i e s , p e o p l e w i l l " t e n d " to buy seller.  has  can  still make  representative  137 a profit.  W i t h m o r e p e o p l e b u y i n g f r o m p r i c e - c u t t e r s , the m a j o r s t a t i o n s ,  w h i c h a r e not r e a l l y c o n v e n i e n t o r w h i c h cannot o f f e r f u l l s e r v i c e , w i l l go out o f b u s i n e s s o r w i l l be p o o r b u s i n e s s e s .  The city again suffers  of p o o r b u s i n e s s e n t e r p r i s e s , v a c a n t l o t s , a n d s h o d d y b u i l d i n g s .  because S i n c e the  m a j o r c o m p a n i e s s u p p l y the b u l k o f g a s o l i n e to the i n d e p e n d e n t s , the c o s t of s u c h d i s e c o n o m i e s  a r e a g a i n p a s s e d onto the c o n s u m e r , a n d the c i t y i s  stuck with r e l a t i v e l y u n s i g h t l y and i l l equipped p r i c e - c u t t e r  stations.  B e c a u s e p r i c e - c u t t e r s u s u a l l y l o c a t e o n l e s s d e s i r a b l e s i t e s , the t a x e s are  g e n e r a l l y l o w e r o n t h e s e l o t s , s o the c i t y a g a i n l o s e s .  A l t h o u g h z o n i n g a n d b y - l a w s a r e i n t e n d e d t o f u r t h e r the " p u b l i c g o o d , " t h e y c a n i n s o m e i n s t a n c e s o b s t r u c t the ' p u b l i c g o o d . "  The reason  f o r t h i s i s u s u a l l y a t t r i b u t e d to e n v i r o n m e n t a l c h a n g e s o r l a c k o f i n f o r m a t i o n . In t h i s p a r t o f the t w e n t i e t h c e n t u r y w i t h a n i n c r e a s i n g p a u c i t y of l a n d a n d c h a n g i n g t e c h n o l o g y , the b e s t c o u r s e o f a c t i o n i s t o r a i s e the e n t i r e  infor-  m a t i o n a l l e v e l o f the m a r k e t p l a c e a n d m u n i c i p a l d e c i s i o n - m a k e r s to a p o i n t that a l l o w s s o m e d e g r e e b e e n d e s i g n e d to c o n v e y  of e n l i g h t e n e d c o m p r o m i s e .  T h i s thesis has  s o m e s m a l l b i t of new k n o w l e d g e c o n c e r n i n g  urban  r e t a i l s i t e ; n a m e l y that the r e q u i r e m e n t s f o r a n e f f i c i e n t a n d v i a b l e r e t a i l s i t e a r e to s o m e e x t e n t d e p e n d e n t o n the t y p e o f m a r k e t i n g s t r a t e g y that i s u s e d i n s e l l i n g the p r o d u c t . q u a l i t y of s i t e v a r y .  As marketing  s t r a t e g i e s v a r y s o w i l l the  T h i s a s p e c t i s i m p o r t a n t t o both c o r p o r a t i o n s a n d  c i t i e s who w a n t to m a x i m i z e u r b a n  space.  BIBLIOGRAPHY  Alder,  L. (Ed.) Plotting marketing strategy.  New Y o r k :  Simon and  S c h u s t e r , 1967. Alderson,  W. , & S h a p i r o ,  In R. C o x , W. Homewood: Alonso,  W.  S. I. T o w a r d s a t h e o r y o f r e t a i l  Alderson,  R i c h a r d I r w i n I n c . , 1964.  L o c a t i o n and land use:  Cambridge:  Harvard  T o w a r d a g e n e r a l t h e o r y of l a n d r e n t .  U n i v e r s i t y P r e s s , 1964,  A m e r i c a n S o c i e t y of P l a n n i n g O f f i c i a l s . design.  competitions.  & S. J . S h a p i r o ( E d s . ) , T h e o r y i n m a r k e t i n g .  Gasoline station location and  I n f o r m a t i o n R e p o r t N o . 140, I 9 6 0 .  Anonymous,  What p u l l s m o t o r i s t s to a f a v o r i t e s e r v i c e s t a t i o n .  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M a j o r  C o m p a n y  Stations  B.  -  Data  M a c r o Score  A  Tables  Total  Gallonage  Score  43  24  67  350,000  36  29  65  300,000  34  28  62  300,000  33  24  57  280,000  35  26  61  260,000  27  30  57  220,000  41  25  66  324,000  32  27  59  272,000  33  24  57  236,000  35  26  51  179,000  33  24  57  162,000  28  28  56  157,000  34  28  62  279,000  33  29  62  254,900  33  24  57  246,400  34  26  60  203,800  27  31  58  192,000  33  26  59  165,800  26  29  55  160,500  33  24  57  149,600  27  27  54  149,200  27  26  53  146,400  29  24  53  143,300  Independent  29  27  56.  450,000  Stations  18  24  42  270,000  25  24  49  260,000  25  24  49  250,000  17  21  38  250,000  17  21  38  150,000  12  21  32  100,000  15  24  39  510,000  29  26  55  500,000  20  27  47  450,000  19  25  44  200,000  43  24  67  25  22  47  1,350,000 220,000  21  36  57  29  26  55  760,000  14  25  39  540,000  17  24  41  160,000  31  32  63  860,000  29  24  53  620,000  19  25  44  870.000  .  2,100,000  

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